2019 FinReg Outlook: The Calm Before the Storm

Here Comes UCITS 6 … AIFMD 2, PRIIPs 2, and Maybe Even MiFID 3 Once the new parliament is formed this summer, EU policymakers will shift gears from finalizing rules to considering new regulatory changes. It is very likely that we will see the revival of UCITS 6, which was originally proposed in 2012. A number of the elements from the original proposal, such as the Money Market Fund rules, have been handled in separate regulations. Nonetheless, asset managers should expect UCITS 6 to be quite broad and possible elements could include enhanced liquidity management rules, the creation of specific third-country delegation provisions, and restrictions on performance fee usage. It is also possible that some policymakers will try to revive the bonus cap for asset managers, which was abandoned with UCITS 5. UCITS 6 is not the only potential regulatory sequel in the pipeline. There could also be consultations on AIFMD 2, PRIIPs 2, and even MiFID 3. These regulations are at the core of the asset management industry and, depending on their scope, could have substantial long- term global implications. This will be the first major wave of EU regulation of the post-Brexit era, where the UK may no longer have direct say in EU policymaking. The UK has historically been a major contributor to EU policy and its absence should noticeably change the dynamic. For example, the UK was instrumental in shutting down the UCITS 5 bonus cap. With the UK no longer at the table, the industry is losing what has often been an important ally. The industry should be more vigilant in the consultation process and will need to recalibrate their lobbying efforts to focus on winning new allies in Brussels. The sooner asset management adjusts to the new reality of the post-Brexit era, the better positioned it will be to deal with the next round of regulatory change. 6   Custody and Fund Services