February 2014

ASSET MANAGERS FORUM
UPDATE
FEBRUARY 2014
NEW Working Group – Positional Identifier
In response to a need discussed at the AMF Derivatives
Operations Committee meeting, the AMF has established
a new Positional Identifier Working Group. As an outcome
of the global financial crisis, the OTC derivatives industry is
experiencing major changes in response to new requirements
for the trading and clearing processes which overlap
with many parties. All the industry constituents, including
investment managers, SEFs, CCPs, admin/custodians, FCMs,
SDRs, middleware providers, and other service providers, are
trying to meet these new regulatory requirements; however,
oftentimes the parties are working in parallel and not together.
In order to bring consistency to the process, there is a need
for a standard trade identifier that could be used for trading
and clearing, and downstream processes including collateral
management. The standard identifier can help with timeliness,
tracking, and regulatory compliance for all parties.
The AMF Positional Identifier Working Group was created to
work on standardizing overall data requirements for all the
industry constituents, focusing on the consistency of the
data content and minimum expectations of data delivery, not
on the delivery method. The data should be normalized and
flow between parties meeting a minimum set of requirements
and connecting investment managers, SEFs, CCPs, admin/
custodians, etc. This normalized data should also feed the
data repositories. The normalized data set would enable faster
connections to new entrants, including new counterparties
and service providers. The goal of the working group is to
develop a best practice for the industry. The key is to have all
the players in the ecosystem as part of the process. The best
practice document will contain a problem statement, current
landscape including processes from trading through collateral
all the way to reporting; and the best practice recommendation.
The Working Group is still refining its scope, but is already
pursuing identifiers for credit index swaps, and has met with
CUSIP towards this end. The working group is still open,
and interested participants should contact Elisa Nuottajarvi
for inclusion in the group. The Working Group is co-chaired
by: Michael Burg, BNY Mellon; Damian Lewandowski, BNY
Mellon; and Joshua Satten, Northern Trust.
AMF TMPG Margining Working Group
SIFMA held an event on TMPG Margining in January to discuss
the current status and industry state. It was noted that the
industry has made progress in putting in place MSFTAs and
setting up the operational process for margining, however, it
takes longer for the 40-Act funds adopt the margining process
due to the more complex legal requirements.
The AMF TMPG Margining Working Group met at the AMF
Member Meeting on February 5th, and discussed how the
margining is going, as well as the proposed amendments to the
FINRA 4210 margining rule. The MSFTA on-boarding process
is still underway. Some of the main challenges are cure periods
and consistency among brokers. Some agreements have
been under negotiations for over four months. Some brokers
are slow to respond which may be due to the large volume
of on-boarding still taking place. Also due to the increased
volume, asset managers have experienced some delays in
setting up segregated accounts with custodians, and getting
ACA agreements in place.
The Working Group agreed that the amendments to the
FINRA Rule 4210 will have a major impact on small clients and
brokers.
CONTINUED ON PAGE 2
ASSET MANAGEMENT UPDATE
SIFMA has created a joint working group looking at the
FINRA rule, and creating a response. Some issues that
buy side firms have raised with the proposed amendments
relate to the initial and maintenance margin, harmonization
with TMPG requirements, close-outs, the implementation
period, documentation, definition of the exempt account, and
delivering financials. At the time of writing, the working group
is still determining the best way to respond, whether via a joint
letter, or a separate response from the asset management
group.
SIFMA has scheduled an event on the afternoon of Monday,
March 24th to discuss the FINRA 4210 rule. The registration
for the event is available on the SIFMA website.
The AMF TMPG Margining Operations Working Group is
co-chaired by Alison Goldberg of Franklin Templeton, Jesse
Robinson of GE Asset Management, and Ted Leveroni of
Omgeo.
AMF Operational Risk Committee
The AMF Operational Risk Committee meets monthly to
discuss various topics related to operational risk. Recently,
the Committee has been engaged in discussions on
cybersecurity (more details below), planning for the February
5th Member Meeting panel discussion on asset management
and outsourcing, as well as planning and choosing committee
areas of focus for the upcoming months. The Committee
has decided to do a deeper dive on operational risk relating
to STP. The Committee’s first step towards the deeper dive
will be to agree on a common definition of STP, or straight
through processing, then share common key risk indicators
(KRIs), and harmonize the KRIs so that firms can use them
for benchmarking themselves across an industry standard.
The Committee may then look at individual challenges. Chris
Fedele of Broadridge gave a presentation on this topic at the
Committee’s February meeting, and will be one of the leads
focusing on this topic.
The Committee also put together a panel presentation at the
February 5th AMF Member Meeting, focusing on outsourcing
and vendor management risk, which have become
hot operational risk topics. There are recent regulatory
pronouncements that also require attention in this space. In
2013, the United Kingdom Financial Conduct Authority (FCA)
2
recommended that asset managers who outsource regulated
activities and/or activities that are critical or important should
review their outsourcing arrangements and, if necessary,
enhance their contingency plans in the event of the failure of a
service provider. The FCA also recommended asset managers
assess the effectiveness of their oversight arrangements,
particularly in respect of making sure that they continue to
have the necessary internal expertise to be able to effectively
manage their service provider. In the U.S., vendor management
recommendations have come out from the Federal Reserve,
the OCC and other financial industry regulatory entities. The
panel was moderated by Joe Haddock of Annaly Capital
Management, and included Ekko Jennings of Morgan Stanley
Investment Mangement; Mark LaMonica of Ernst & Young; and
Jeff Zoller of T Rowe Price as panelists. The panel discussed
how asset management firms and outsourcing providers
are handling these pronouncements, and touched on best
practices, assessing country specific risks, and mitigating
operational and regulatory risks associated with outsourcing
and vendor management.
The AMF Operational Risk Committee is co-chaired by Sam
Chari of Alliance Bernstein, Joe Haddock of Annaly Capital
Management; and Gina Sklar of T Rowe Price.
Cybersecurity Update
The AMF Operational Risk Committee has engaged with
SIFMA on cybersecurity. Early this year, the Committee
surveyed its members on the buy side’s status on various
cybersecurity related topics, such as cyber insurance, whether
firms have threat and response frameworks in place, do they
have a specific person or team responsible for cybersecurity,
and where does that person report, etc. The survey results
were reviewed by the AMF Operational Risk Committee, and
members who were interested in the topic were encouraged
to sign up with the related SIFMA committees that are working
on cybersecurity issues.
At the February meetings, Karl Schimmeck of SIFMA spoke
before the AMF Operational Risk Committee, and the AMF
Steering Committee, about the many activities that are
taking place within SIFMA for cybersecurity, including the
Quantum Dawn II test and its results. Karl also shared
information regarding a new SIFMA Board Level Committee
on Cybersecurity, launched this February. The goal of
the committee is to develop and execute a SIFMA action
plan to engage government and private sector partners to
better protect the industry’s critical systems and data. The
Committee is expected to work on multiple workstreams,
which will likely include a weakness diagnostic mapping of
the cash and securities markets, development of an industry
standard for cybersecurity based on the NIST Cybersecurity
Framework, improvement of the information sharing process,
enhancement of the industry crisis response playbook, and
regulatory and legislative advocacy to support these and any
other goals.
Karl also gave a federal legislative update relating to
cybersecurity, including the National Cybersecurity and Critical
Infrastructure Protection Act (NCCIP), which was reported
favorably during the February 5, U.S. House Committee
on Homeland Security mark-up. SIFMA co-signed a joint
trade letter in support. Thebill primarily focuses on codifying
many of the activities that the U.S. Department of Homeland
Security (DHS) currently supports, as well as establishes
an equal partnership between private industry and DHS. In
addition the bill if enacted would work to ensure that DHS
properly recognizes industry-led entities to facilitate critical
infrastructure protection and incident response.
SIFMA is also monitoring current data breach legislation. There
are several bills that have been drafted in response to the
Target and Neiman Marcus breaches and multiple committee
hearings on the topic. At this point, SIFMA is monitoring the
legislation being considered with a focus on ensuring bills
include a Gramm-Leach Bliley Act (GLBA) exemption, Federal
preemption and realistic reporting requirements.
In addition, SIFMA is promoting improved information sharing
by organizing outreach to the U.S. Senate Select Committee
on Intelligence. SIFMA, ABA and the FSR will be visiting with
the staff of all Members of the Committee to promote the need
for legislation in 2014 with a focus on removing barriers to
sharing; providing liability protections for sharing; establishing
FOIA exemptions for information shared; and improving
sharing from the government entities.
JUNE 17-18 | HILTON NEW YORK | NYC
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ASSET MANAGEMENT UPDATE
Cybersecurity Standards
On February 12, the National Institute of Standards and
Technology (NIST) published a Cybersecurity Framework.
NIST developed this voluntary framework for reducing cyber
risks to critical infrastructure in response to Executive Order
13636: Improving Critical Infrastructure Cybersecurity. The
Framework consists of standards, guidelines, and best
practices to promote the protection of critical infrastructure.
The adoption of the Framework will be voluntary however,
many of the industry regulators will be reviewing the
Framework for gaps with current regulations and possible
incorporation into their regulations on cybersecurity. Overall,
SIFMA members have been supportive of the Framework,
engaged in its development over the past year and believe
that, an organization can reduce its risk by adopting the
framework. The industry submitted comments on the draft
proposal in December 2013 through the FSSCC and those
comments were acted on in the final release with the removal
of a privacy appendix and other minor changes. Following
the public release of the Framework, SIFMA will review and
validate it to ensure members are still in agreement that it can
be used as the foundation for the development of a financial
services sector specific standard. The Board Level Committee
on Cybersecurity will be involved in how the NIST Framework
can be applied to the financial services sector and adopted
by regulators.
Save-the-Date for AMF at SIFMA OPS 2014: April 30, 2014!
April 28–May 1, 2014 • Boca Raton, FL
OPS 2014
OPERATIONS CONFERENCE + EXHIBITION
For over 40 years, the SIFMA Operations Conference & Exhibition has been the trusted
resource for leading operations professionals, offering timely perspectives on improving
operational efficiencies and insight on implementing new regulations in a unique, threeday forum. The 2014 conference will focus on the reforms and operational resiliency that
are designed to strengthen the financial markets infrastructure. This year, in addition to
the asset management specific track sessions during the general conference, The Asset
Managers Forum is hosting an exclusive session with panel discussions on issues that are
important to asset management operations professionals.
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AMF Events – Operational Efficiency Workshop
The Asset Managers Forum Workshop on Operational
Efficiency took place on February 4th. The event was
well attended; and generously sponsored by Broadridge,
TradeWeb and trueEx. The theme of the Workshop was
based on member feedback from the recent AMF member
survey, which emphasized more expectations being placed
on operations especially in light of the recent regulatory
changes. Operations needs to get the new processes right
without sacrificing efficiency, and in fact there is a tremendous
pressure to improve efficiency to meet these new regulatory
and business demands as well as cost pressures.
John Clark of Cutter
Associates gave the
keynote speech at the
AMF Workshop on
Operational Efficiency
The Workshop started with a keynote presentation by John
Clark of Cutter Associates, who spoke about how the drive
for operational efficiency is changing, the changing business
model for asset managers, the range of operating modes and
balancing globalization with specialization, data management
and different solutions for different problems, the different
functionality of the IBOR (Investment Book of Record) vs.
the ABOR (Accounting Book of Record), and client facing
operations modes.
Organizational Set Up and Operational Efficiency panel: Michael Daley, Loomis Sayles; Scott Becchi, Ernst & Young; Michael
DeBevec, Blackrock; David Atterbury, Cornerstone Capital Management
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ASSET MANAGEMENT UPDATE
The first panel discussion focused on Organizational Set Up and
Operational Efficiency, and was moderated by David Atterbury
of Cornerstone Capital Management. Panelists were Scott
Becchi of Ernst & Young, Michael Daley of Loomis Sayles, and
Michael DeBevec of Blackrock. The panelists discussed the
different operational models in use, including shared services
model, client centric model, and hybrid models, and how they
behave in terms of head count, cost, capacity, flexibility and
the ability to grow the business. The panelists addressed also
how to decide which model to utilize, transitioning from one
model to another, staff motivation, addressing issues with third
party service providers, and whether it was possible for the
firm to use various models for different parts of the business.
The second panel, What Transformational Steps Asset
Managers Can Take to Enhance Efficiency? discussed what
asset managers can do when they need to transform a
process quickly to improve efficiency, to ensure regulatory
compliance, or move to the next level of proficiency. The
panel was moderated by John Ratzesberger of T Rowe Price,
and panelists were Paul Gately of BNY Mellon, Ted Leveroni
of Omgeo, Al Morabito of Federated, and Joshua Satten of
Northern Trust. The panel discussed how organizations
decide whether outsourcing is right for their firm, functions
typically outsourced, timeline it takes to set up outsourcing
arrangement, how to ensure minimal disruption, technology,
impact on staff, and how to measure success.
Transformational Steps panel: Ted Leveroni, Omgeo; Paul Gately, BNY Mellon; Joshua Satten, Northern Trust; Al Morabito,
Federated Investors; John Ratzesberger, T. Rowe Price Associates
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The third panel focused on Metrics for Operational Efficiency
and was moderated by Christopher Fedele of Broadridge.
The panelists were Christopher Ramirez of BNY Mellon Asset
Management, Katelyn Ristaus of Goldman Sachs Asset
Management, and Jesse Robinson of GE Asset Management.
The panel discussed their general views on choosing good
metrics, what key metrics their firms use, and how metrics are
shared with clients. The panel also addressed the tools they
have in capturing the metrics, whether via spreadsheets or
a more sophisticated system to track metrics. Another area
of discussion was industry best practices in connection with
metrics, and benchmarking against industry metrics. The
panel also discussed metric in relation to risk, and whether all
metrics are equal, and what, if any, insights are supplemented
with metrics.
The final panel discussion was The Efficiency Monitor – What
Are the Remaining Hot Spots in Operations?. The panel was
moderated by Thomas Ciulla of PWC, and the panelists were
Cynthia Meyn of PIMCO, and Neil Wright of DerivProduct. The
panel discussed the shorter settlement cycle, including the
upcoming T+2 cycle in Europe and the need to complete the
pre-settlement stages of the trade lifecycle more quickly, as
well as the lack of electronic trade allocation software (Oasys)
in Europe. Another topic was the TMPG recommendation
for margining of agency MBS, and the proposed changes
to FINRA margining rule 4210. The MSFTA negotiations are
very involved and still taking place, and operationalizing the
requirement is no small feat. In addition, the panel discussed
SEF trading and the challenges asset managers have faced in
setting up electronic trading of derivatives; protection of client
assets and setting up for tri/quad party segregation; and the
challenges remaining in the process for exchanging cleared
swaps variation margin.
The Program Committee for this workshop, who helped plan
the agenda, consisted of AMF Steering Committee members
David Atterbury of Cornerstone Capital, Ted Leveroni of
Omgeo, and John Ratzesberger of T Rowe Price.
Metrics Panel at the AMF Workshop on Operational Efficiency: Christopher Ramirez, BNY Mellon Asset Management; Jesse
Robinson, GE Asset Management; Katelyn Ristau, Goldman Sachs Asset Management; Christopher Fedele, Broadridge Financial
Solutions
7
ASSET MANAGEMENT UPDATE
AMF Member Meeting
The AMF Member Meeting took place during an ice storm on
Wednesday, February 5th. Tim Cameron of SIFMA kicked off
the event with opening remarks, and introduced the key note
speaker Michael Barnes of Ernst & Young who spoke about
the emerging trends in global regulation, and the impact of
global regulatory change in asset management and funds.
Michael Barnes of
Ernst & Young gave
a presentation on
global regulation at the
AMF Member Meeting
The meeting featured AMF Committee overviews and
Committee break-out sessions for the Collateral Committee,
Custodian Committee, Operational Risk Committee,
Derivatives Operational Committee, Tri-Party Repo Working
Group, and the TMPG Margining Operations Working Group.
The event also featured three panel discussions. The first
panel on Derivatives Processing was a discussion between
Michael Burg of BNY Mellon and Sunil Hirani of TrueEx, and
focused on the current processing challenges in the cleared
derivatives space, especially the lack of unique identifiers that
would travel across the entities involved in trade execution and
processing, including asset manager, sell side, CCPs, SEFs,
FCMs, middle wares, SDRs, and all other service providers.
The discussion also addressed what the industry is doing to
improve this situation and plans to propose standard unique
identifiers that would be used throughout the lifecycle.
The second panel was Asset Managers and Money Market
Funds: Impact on Financial Stability. The panel was moderated
by Matt Nevins of SIFMA, and the panelists were Maria Gattuso
of Willkie Farr, Will Leahey of SIFMA, Matt McGinley of SIFMA,
and Joan Swirsky of Stradley Ronon. The panel discussed
the background and specifics of the SEC proposal for Money
Market Funds; the findings of the SIFMA operational working
group that reviewed the proposal, the AMG response to the
proposal, as well as the OFR study on asset management and
financial stability.
The third panel discussion was the Operational Risk panel
focusing on asset managers and outsourcing that is discussed
in more detail under the AMF Operational Risk Committee
update.
8
The event also featured a keynote address by SIFMA President
and CEO Ken Bentsen, who spoke about SIFMA’s current
initiatives, both in the operations space, as well as in legal and
regulatory areas. Some of the issues he addressed included
GSE reform, EU and TPP trade proposals, and the pending
debt limit. He also spoke about how the buy side is viewed by
the regulators, and the potential of asset managers’ systemic
designation as per the OFR report.
The final session of the meeting covered the DTCC objectives
and priorities for 2014, as discussed by John Abel of DTCC.
The Program Committee who helped design the program
for this event consisted of Joe Haddock of Annaly Capital,
Michael Daley of Loomis Sayles, and Jesse Robinson of GE
Asset Management.
Derivatives Operations Committee Update
The AMF Derivatives Operations Committee represents the
buy side focusing on the key operational challenges related
to OTC derivatives currently taking place and affecting asset
managers. The Committee seeks improvements in the
derivatives processing environment and strives to identify
opportunities to reduce related operational risks. In 2013,
the Committee focused a good amount of time on clearing
readiness and refinement. In preparation for mandatory
clearing, representatives from clearinghouses gave regular
updates at the Committee’s monthly meetings to ensure that
asset managers had information about operational issues and
differences between the central clearing parties. This initiative
was also supported by a matrix document that was populated
by the clearinghouses.
The Committee meetings have also included regulatory updates
from Gabe Rosenberg of Davis Polk and updates from Matt
Nevins and Peter Ryan from the SIFMA Asset Management
Group (AMG). The AMG Derivatives Committee’s efforts have
direct impact with regulators via comment letters and CFTC
visits – which in many cases result in positive outcomes, such
as No Action Relief for regulatory implementation dates and
clarifying guidance to broad or contradictory Rules.
In the second half of 2013, the AMF Derivatives Operations
Committee began focusing more on 2014 deadlines such
as EMIR Reporting and Swap Execution Facility mandatory
trading. The Committee hosted a Lunch and Learn on EMIR
Reporting in September discussing the EMIR requirements for
those accounts or clients that are domiciled in the EU starting
February 12th, along with clarification that third country entities
– or entities that are domiciled outside the EU are outside the
EMIR Reporting scope. We also coordinated a “SEFtastic”
event in September featuring presentations and demos from
8 different Swap Execution Facilities along with a review of
the SEF Rules from regulatory reform leaders. This was an
enlightening experience for attendees as the “many to many”
platform or infamous Footnote 88 issue was brought to light,
and many buy side participants were all able to capture a good
amount of comparative information between the SEFs within a
short amount of time at this event.
Most recently, the Committee’s monthly meetings included
representatives from EMIR Trade Repositories, and firms
offering EMIR reporting services. Even though the EMIR
Reporting deadline has passed, there are new and more
efficient services being developed that could ease these
regulatory challenges in the future. In an effort to provide
further refinement opportunities, the Committee will continue
to seek out additional offerings for our members, including
guest speakers regarding Futures Commissions Merchant
sponsored access, SEF aggregation, and EMIR Reporting
Services. As new concerns and opportunities arise from AMF
members, we will include additional initiatives to further support
our goals and objectives – to reduce related operational risks
with derivatives processing. The Committee is co-chaired by
Amy Caruso from Babson Capital Management, Kimberley
Dall of State Street, and Ila Eckhoff of BlackRock.
AMF Derivatives Operations Committee Meeting Schedule:
March 19, 2014
10 a.m. ET
August 20, 2014
10 a.m. ET
April 16, 2014
10 a.m. ET
September 17, 2014
10 a.m. ET
May 21, 2014
10 a.m. ET
October 9, 2014 (in person meeting)
June 18, 2014
10 a.m. ET
November 19, 2014
10 a.m. ET
July 16, 2014
10 a.m. ET
December 17, 2014
10 a.m. ET
9
ASSET MANAGEMENT UPDATE
AMF Session
Come to the SIFMA OPS Conference in Boca Raton, FL, April 28-May 1, and attend the full conference
featuring presentations and panel discussions on a variety of operations topics. This year, we are adding an
AMF session with these unique panel discussions:
BUY SIDE AND SELL SIDE - PARTNERS IN OPERATIONS
This panel discussion featuring senior operations professionals
from both buy side and sell side firms will discuss how buy
side and sell side can work together collaboratively to improve
operational efficiency across the board. The panelists will share
what type of expectations they have from counterparties. The
panel will also discuss practical ways to improve relationships
across the aisle in order to improve operational relationships
and business structures.
THE FULL PICTURE: BUY SIDE, SELL SIDE, VENDORS
AND SERVICE PROVIDERS
This panel discussion will add vendor and service providers
to the mix, and will discuss topics such as partnering with
providers to provide better products, proven efficient vendor
management practices, and share techniques in managing
vendors and providers.
CONFLICT RESOLUTION
In a perfect world there would be no operational bottlenecks,
errors or differences of opinion. However, we don’t live in
a perfect world and thus conflict resolution practices are
important. This panel will discuss various ways firms have
implemented to make conflict resolution easier and more
timely.
THE HUMAN CAPITAL
This panel will discuss a topic that is relevant across the
industry, i.e. the human capital. In today’s environment
where the pressure to control expense growth in the face of
tightening margins has become the “new normal” it is ever
more important to share practical insights on how firms can
develop talent and motivate employees.
AMF Mission Statement
Dedicated to facilitating collaboration among the buy-side
operations community, the Asset Managers Forum (AMF)
brings together subject matter experts to discuss and develop
practical solutions to highly topical operational challenges.
The AMF’s mission is to provide thought leadership and
guidance on pertinent industry issues and to create a premier
venue for operations professionals to develop and share best
practices in order to drive industry change.
AMF Steering Committee 2014
David Atterbury
Cornerstone Capital Management
Joseph Haddock
Annaly Capital Management
John Ratzesberger
T. Rowe Price
Simon Ball
UBS Global Asset Management
Michael Herskovitz
Alliance Bernstein (Vice Chair)
Jesse Robinson
GE Asset Management
Jason Brasile
State Street
Kyla LaPierre
State Street
Angela Schofield
Wellington Management Company
Michael DeBevec
BlackRock
Ted Leveroni
Omgeo
Mary Stone
GE Asset Management
Christopher Fedele
Broadridge
Cynthia Meyn
PIMCO
Tracy Winthrop
JP Morgan Chase
Christopher Fiorelli
JP Morgan Asset Management
Albert Morabito
Federated Investors (Chair)
Steve Wisneski
Franklin Templeton
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AMG Update – November 2013 through February 2014
SEFs
Request for Interpretive Guidance Relating to Consent
to Jurisdiction on SEFs: On January 23, AMG submitted a
letter to CFTC staff requesting interpretive guidance for asset
managers relating to the consent to jurisdiction requirement
in the final SEF rules. The Jurisdiction Provision states that
“prior to granting any eligible contract participant access to its
facilities, a swap execution facility shall require that the eligible
contract participant consent to its jurisdiction.” AMG believes
that it should be sufficient for the asset manager, and not every
underlying client, to consent to the jurisdiction of the SEF. On
February 10, the CFTC issued guidance confirming that all
participants must consent to the jurisdiction of a SEF, but that
it is not necessary to obtain an affirmative writing.
MAT Phased Implementation: On January 13, AMG
requested that the CFTC grant relief from the effective dates
for mandatory SEF execution for market participants that
are neither swap dealers (SDs) nor major swap participants
(MSPs) by not recommending enforcement action against any
non-SD/non-MSP for non-compliance with a trade execution
requirement for 90 days after the applicable effective date. On
February 14, AMG submitted a supplemental letter providing
additional information and supporting this request.
Made Available to Trade (MAT): On December 2, AMG
submitted comments on Javelin’s MAT determination
suggesting that the determination should have been rejected
by the CFTC before Javelin amended their MAT determination
to radically narrow the scope of swaps that it covered. Javelin
took this action after receiving considerable pressure from
buy-side participants, including AMG.
Recordkeeping: On December 10, AMG submitted a noaction request to the CFTC requesting interpretive guidance
and relief on the application of the CFTC’s Rule 1.35 relating
to oral and written recordkeeping requirements applicable to
members of SEFs as it relates to asset managers. In response
to this request, on December 20, the CFTC issued time-limited
no-action relief to commodity trading advisors from complying
with the oral recording portion of the rule until May 1, 2014.
EMIR
On December 19, AMG submitted a letter to the European
Commission requesting a deferred start date for the
application of the reporting obligation under the European
Market Infrastructure Regulation (EMIR) to buy-side market
participants for a period of at least one year. The European
Commission responded on January 30, denying this request.
AMG also provided comments on the ISDA-FOA template
agreement for delegated reporting, which was published in
January.
POSITION LIMITS
Aggregation Extension Request: On December 20, 2013,
AMG, together with ISDA, submitted a request to extend
the comment deadline for the aggregation of positions rule
proposal to match the comment deadline for the position limits
proposal. On January 9, the CFTC granted this request.
Aggregation of Position Limits: On February 10, AMG
submitted comments to the CFTC on its Aggregation of
Positions proposal. AMG expressed concerns with certain
aspects of the proposal, including owned entity aggregation,
investment in accounts or pools withthe “substantially identical
trading strategies”, and certain elements of the Independent
Account Controller Exemption.
Position Limits: On February 10, AMG submitted comments
to the CFTC on its Position Limits on Derivatives proposal.
AMG asked the CFTC to withdraw this proposal as it has not
found that speculative position limits are “necessary” and
“appropriate” and fulfilled its statutory mandate to examine
commodities on a contract-by-contract basis. If the CFTC
determines to move ahead with final rulemaking, AMG makes
several recommendations, including: modifying spot-month
and non-spot month limits, preserving the risk management
exemption, granting counterparties to “commodity index
contracts” an exemption, exempting registered investment
companies and ERISA accounts, and expanding the
grandfathering relief available to pre-existing positions.
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ASSET MANAGEMENT UPDATE
MUNICIPAL ADVISOR
On January 2, AMG, together with the Investment Adviser Association, requested
an extension of the SEC’s muni advisor rule for SEC-registered investment advisers
that provide investment advice to municipal entities pursuant to an advisory
agreement regarding a portfolio of investments that contains swaps or securitybase swaps as part of ongoing portfolio management. The SEC issued a set of
frequently-asked questions on January 10, clarifying that registration as a municipal
advisor would not be required under these circumstances. On January 13, the
SEC extended the date for compliance with the final municipal advisor rules until
July 1, 2014.
OFR ASSET MANAGER STUDY
On November 1, AMG submitted comments to the SEC on a study published by
the Office of Financial Research of the U.S. Department of Treasury (OFR) and
commissioned by the Financial Stability Oversight Council (FSOC), Asset Management
and Financial Stability. AMG expressed that the OFR study lacks evidence of rigorous
analysis, and therefore, does not reflect an accurate or effective understanding of the
role of asset managers, the relationship between asset managers and the investment
products they offer, and the factors that link asset managers and investment products
to potential financial market distress.
MONEY MARKET FUNDS
On September 17, AMG submitted a letter to the SEC on their Money Market Fund
Reform; Amendments to Form PF proposal. AMG expressed concern that certain
of the proposed reforms would either obstruct the operation of money market funds
or alter their indispensable characteristics, harming shareholders who rely on them
as a cash management tool and issuers who depend on money market funds as
an important source of financing. Among other things, AMG urged the SEC not to
adopt both a floating NAV and fees and gates proposal, and suggested that the
SEC exempt tax exempt funds and change the definition of a retail fund. AMG also
identified certain transition, tax, accounting and brokerage suitability issues that
must be addressed in any regulatory changes applicable to money market funds.
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JOIN THE AMF AND AMG
The AMF/AMG is now
accepting applications for
membership from asset
managers, custodian banks
and vendors.
ASSET MANAGERS
FORUM
www.sifma.org/amf
SIFMA
120 Broadway
New York, NY 10271
AMF/AMG
PROFESSIONAL STAFF
Tim Cameron
Matt Nevins
Elisa Nuottajarvi
Peter Ryan
212-313-1100