Regulatory update

This quarterly regulatory update covers major new regulatory requirements and substantial developments that affect the investment management industry.

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CONVERGENCE OF THE US FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) AND THE INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB)

In September 2008, FASB and IASB issued the latest progress report and timetable for completion for their convergence project begun in September 2002. Copies of the report can be downloaded at http://www.iasb.org

FEDERAL INFORMATION SECURITY MANAGEMENT ACT

The National Institute of Standards and Technology (NIST), part of the U.S. Department of Commerce, has published the first major update, since December 2005, of its Special Publication 800-53. Revision 3 of its ‘Recommended Security Controls for Federal Information Systems and Organizations’ was published in February 2009 and is an initial public draft on which respondents are asked to comment. The full text of this 200-page document can be found at http://csrc.nist.gov/groups/SMA/fisma/index.html

FINANCIAL ACCOUNTING STANDARD NO. 157

On 10 October 2008, FASB issued a FAS Staff Position to clarify FAS 157, ‘Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.’ FAS 157-3 became effective upon issuance and affects all entities that had not by 10 October 2008 issued financial statements for the reporting period ending 30 September 2008.

GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)

A new GIPS 2010 exposure draft was published 23 January 2009 and is now available for industry comment. Interested parties have until 1 July to file their comments via the GIPS website http://www.gipstandards.org. It is planned that the new standard will be adopted in early 2010 and will take effect from 1 January 2011.

MONEY MARKET RULE 2A-7.

The US Securities and Exchange Commission is planning to overhaul money market funds Rule 2a-7, part of the Investment Company Act, according to its investment management division director Andrew Donohue. The possible changes are likely to focus on liquidity, disclosure and risk in short-term investments. They seem likely to have an impact on investment managers in the coming year and may require a change in technology.

SOLVENCY II

Negotiations in Brussels over the draft of Solvency II, the ‘Basel II for insurance companies,’ are reported to be progressing well. The aim is for a final draft to be ready for approval by the European Parliament in April 2009. Meanwhile, the Committee of European Banking Supervisors and the Committee of European Insurance and Occupational Pensions Supervisors in January announced a set of agreed principles aimed at improving cooperation between national regulators through so-called colleges of supervisors.

UCITS IV

The European Parliament approved the UCITS IV draft Directive on 13 January 2009. EU member states are expected to finally approve the directive in March which will lead to national implementation by July 2011. The key achievement of the current step in the UCITS legislation is that it effectively gives the go-ahead for a pan-European management company passport whose adoption had previously been in doubt.