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FUNDS The American effect


Just as laws in Europe are set to impact the funds business, the industry will also be affected by changes taking place in the US. Liz Salecka investigates


W


HILE many Channel Island fund managers may have escaped compliance with the EU’s AIFMD, those active


in the US are unlikely to be exonerated from the Dodd-Frank Act’s requirements. This legislation aims to bring the activities


of all asset managers with a US presence and/or US-located assets and US clients (above agreed minimums) under the US Securities and Exchange Commission’s (SEC) regulation, and will enforce more extensive book-keeping and reporting requirements. All fund managers with US connections


must register with the SEC by 21 July 2011, or file their reports by 20 August 2011. According to John Roche, Partner at PwC


in Guernsey, managers required to follow Dodd-Frank’s full registration regime will face additional rules and regulations in relation to the protection of investor assets, valuation of


investor assets and management of conflicts of interest. They will also need to appoint a Chief Compliance Officer. “Those funds that recognise they need


to follow the full regime should already be working with their legal advisers, accountants and auditors to get the systems and processes needed in place,” he explains. However, there is some light at the end


of the tunnel for the Channel Island funds in that they may be able to take advantage of the Private Fund Adviser exemption, which will apply to all firms that do not have a US office – if it is allowed when the SEC publishes its final rules this spring. “A lot of fund managers using the Channel


Islands (90 per cent) are most likely to fall into the Private Fund Adviser exemption, and will be required to hold minimum books and records, which the SEC can examine,” says Roche, pointing out that this will also alleviate them from other requirements such as the need to appoint a Chief Compliance Officer.


“However, there are no clear rules in relation to this yet.” He explains that, although the consultation


period for the Private Fund Adviser exemption has now closed, the next communication from the SEC is not anticipated until late March, or possibly April/May. “Those that are still waiting to see the


final exemptions, are unlikely to have done that much yet, although this is a bit like walking a tightrope – if the exemptions don’t come out as anticipated, they will need to go for full registration,” he says. Although it is not yet clear how regulators


in Jersey and Guernsey will interact with the SEC, Roche believes all fund managers that register should anticipate inspection visits by the SEC and local regulators. “To register and not comply would be


very dangerous,” he warns. “The SEC could construe non-compliance as fraud, and this would have very serious implications for a fund manager’s reputation.”


April/May 2011 businesslife.co 35 ➔


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