On September 4, MFA submitted comments to the European Banking Authority (EBA) on the technical standards for the Investment Firm Regulation and Investment Firm Directive. In response to the EBA’s request for feedback on calculations to be used to determine capital requirements for investment firms (“K-factors”), MFA commented that the K-factor for assets under management (K-AUM) should be calculated as the net value of assets the investment firm manages on behalf of its clients. For derivatives positions, the AUM calculation would include only the capital that has been deployed from the portfolio to maintain the derivatives position. MFA believes this is a better reflection of the actual risk to the firm’s clients and more appropriate for the purposes of K-AUM as a “Risk-to-Client” K-factor. Additionally, MFA asked the EBA for clarification that when calculating Client Orders Handled (K-COH) that exclusions for (1) assets already included under the K-AUM calculation, and (2) activities related to the delegation of management of assets by a financial entity, be equally applicable to transactions relating to the provision of delegated portfolio management services on behalf of investment funds. Regarding remuneration, MFA also commented that the EBA should grant national competent authorities (NCAs) the ability to provide blanket consent for the use alternative arrangements where the variable remuneration reflects the performance of assets managed by the firm, without firms being required to obtain individual approval for such arrangements from their NCAs.
