The Alternative Investment Fund Managers Regulations 2013

PART 7 Duties and powers of the FCA

Designation as competent authority

65.  The FCA is responsible for all functions of the competent authority provided for in any directly applicable EU regulation made under the directive, in the EuSEF Regulation and in the EuVECA Regulation in the United Kingdom.

Requirement to notify ESMA of information required from AIFMs

66.  If the FCA requires additional information from a full-scope UK AIFM in accordance with Article 24.5 of the directive, the FCA must inform ESMA about this requirement.

Use of information by FCA and supervisory cooperation

67.—(1) The FCA must use the information it gathers under implementing provisions relating to Article 24 of the directive in respect of AIFMs it supervises for the purposes of identifying the extent to which the use of leverage contributes to—

(a) the build up of systemic risk in the financial system;

(b) the risks of disorderly markets; or

(c) the risks to the long-term growth of the economy.

(2) The FCA must ensure that—

(a) the information mentioned in paragraph (1), and

(b) the information it gathers under implementing provisions relating to Article 7 of the directive,

is made available to ESMA, the ESRB, and competent authorities of other relevant EEA States by means of the procedures set out in Article 50 of the directive.

(3) The FCA must, without delay, provide information by means of the procedures set out in Article 50 of the directive, and directly to the competent authority of another EEA State, if an AIFM under the FCA’s responsibility, or an AIF managed by such an AIFM, could potentially constitute an important source of counterparty risk to a credit institution or other systemically relevant institution in that EEA State.

(4) If the FCA obtains information from the depositary of an EEA AIF managed by a full-scope UK AIFM or a full-scope EEA AIFM, or of a UK AIF managed by a full-scope EEA AIFM, which the depositary has obtained while performing its duties as the depositary of that AIF and which may be necessary for the competent authority of the EEA AIF or the full-scope EEA AIFM, the FCA must provide such information to that competent authority without delay.

Limits on leverage

68.—(1) The FCA must—

(a) assess the risks that the use of leverage by full-scope UK AIFMs with respect to the AIFs managed by them could entail;

(b) use the measures in paragraph (2), if they are necessary in order to ensure the stability and integrity of the financial system, to limit the extent to which the use of leverage by a full-scope UK AIFM with respect to the AIFs managed by it contributes to—

(i) the build up of systemic risk in the financial system; or

(ii) the risks of disorderly markets.

(2) The measures are—

(a) imposing limits on the level of leverage that such an AIFM may employ; or

(b) imposing other restrictions on the management of such an AIF.

(3) Before and after taking a measure mentioned in paragraph (2), the FCA must notify ESMA, the ESRB and, where the measures concern an EEA AIF, the competent authority of the EEA AIF, through the procedures set out in Article 50 of the directive.

(4) The notification to be given under paragraph (3) before the measures are taken must contain details of—

(a) the proposed measures;

(b) the reasons for the measures; and

(c) when the measures are intended to take effect.

(5) Unless there are exceptional circumstances, the FCA must give such notification at least 10 working days before the proposed measures are intended to take effect.

(6) If the FCA proposes to take action contrary to ESMA’s advice mentioned in Article 25.6 or 25.7 of the directive, it must inform ESMA, stating its reasons.

(7) The FCA may use its powers under section 55J and 55L of the Act (variation or cancellation on initiative of regulator and imposition of requirements by the FCA) to impose limits on leverage or other restrictions on the management of an AIF, but this paragraph does not limit the powers of the FCA.

Exchange of information relating to potential systemic consequences of AIFM activity

69.  The FCA must communicate information to—

(a) competent authorities,

(b) ESMA, and

(c) the ESRB,

where the information is relevant for monitoring and responding to the potential implications of the activities of individual AIFMs or AIFMs collectively for the stability of systemically relevant financial institutions and the orderly functioning of markets on which AIFMs are active.