This includes a change to short-selling rules to protect the confidentiality of investment managers' positions, dealing with the clash between UK and US rules on payment for research and a rethink of securitisation rules to make them more flexible and help reboot the market.
Following the HM Treasury's review of short-selling rules in December 2022, the government has said it will:
- Replace the current public disclosure regime based on individual net short positions with an aggregated net short position disclosure regime.
- Increase the current disclosure threshold for net short position reporting to the Financial Conduct Authority from 0.1% to 0.2%.
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Having been a vocal player in the debate, the Alternative Investment Management Association (AIMA) has welcomed this news.
The association has highlighted the way in which public transparency of short positions disincentivises firms from taking those positions - which it said can harm returns and market functioning - and the "disproportionate" cost associated with reporting short positions to the FCA.
A parallel consultation will also now open the possibility of scaling back short selling rules so that they no longer apply to sovereign debt and CDS.
Permit bundled payment for research approved
Meanwhile, Hunt has also addressed the "clash" between US and UK/EU rules on payment for research.
The need for regulatory action was amplified when the US Securities and Exchange Commission confirmed last year that it would "let lapse its no action relief that enabled firms subject to MiFID to pay for research on an unbundled, ‘hard dollar' basis without this triggering the requirement for their research counterparties to register as investment advisers".
The chancellor said: "We welcome the FCA's commitment to start immediate engagement with the market to inform any rule changes on removing the requirement to unbundle research costs by the first half of next year. This will ensure we are better able to fund quality research into the new Silicon Valley sectors."
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The move to permit bundled payment for research and execution services in line with the conclusions of Rachel Kent's Investment Research Review means the UK is moving its framework to be compatible with the structure of the US regime.
The AIMA said this will make life considerably easier for investment managers with cross-border operations.
The FCA has already responded to the Investment Research Review to say it is "open to consider swift actions, if needed, to support firms impacted by changes to regulation in other jurisdictions, based on discussion with individual firms or parts of the market".
A more flexible approach
The chancellor also revealed a means to making sure "our financial services sector, traditionally so nimble and agile, has the right architecture to provide the best possible security for investors as well as capital for businesses".
He said: "We will reform and simplify our financial services rulebook to ensure we have the most growth-friendly regulation possible without compromising our commitment to stability."
Empowering the FCA to tailor the rules creates the opportunity for the UK to introduce other reforms and improve the ability of UK asset managers and their clients to invest in global securitisation products, he added.
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Furthermore, the narrowing of the scope of the institutional investor definition to exclude non-UK AIFMs will remove a significant source of uncertainty for many investors.
For several years, the AIMA has emphasised the professional nature of the securitisation market to UK authorities and explained why a more flexible approach can boost the role the sector plays in supporting economic growth.
Jack Inglis, CEO of the AIMA, said this was important step towards securitisation markets playing a fuller role in the financing of UK businesses.
He added: "These are all important reforms that will be of huge benefit to the UK's world-leading hedge fund industry."