mfa-aima standard certification fia template …€¦ · 1 standard certification of dea client...

1 Standard Certification of DEA Client Information

MFA-AIMA STANDARD CERTIFICATION FIA TEMPLATE QUESTIONNAIRE

DIRECT ELECTRONIC ACCESS (“DEA”) CLIENT REPRESENTATION

MFA1 and AIMA2 (the “Associations”) appreciate that FIA has created a template questionnaire to assist investment firms that provide DEA services (“DEA Providers”) with their MiFID II compliance and their obligation to conduct due diligence on clients that use DEA services (“DEA Clients”). In light of the short timeframe in which DEA Clients need to complete multiple questionnaires from their DEA Providers, oftentimes distinct questionnaires, the Associations have created a “Standard Certification” to FIA’s template questionnaire for DEA due diligence. The purpose of the Standard Certification is to allow DEA Clients to provide standardized client information and certification of a base-level of controls and practices consistent with MiFID II requirements.

The Standard Certification is meant to assist DEA Providers in collecting necessary information from their DEA Clients in a timely manner, so that DEA Client trading continues after MiFID II rules become effective in January 2018. The Standard Certification is not meant to deter DEA Providers from seeking additional information that they deem necessary from DEA Clients to fulfill their due diligence obligations under MiFID II. AsDEA Providers are ultimately responsible for conducting due diligence of their clients’ trading in connection with the use of DEA, final satisfaction of due diligence requirements remain with the DEA Providers.

The Associations do not represent that the Standard Certification by itself will satisfy a DEA Provider’s due diligence obligations under MiFID II. The Standard Certification is not meant to limit the services that a DEA Provider or DEA Client intends to offer or receive.

1 Managed Funds Association (MFA) represents the global alternative investment industry and its investors by advocating for sound industry practices and public policies that foster efficient, transparent, and fair capital

markets. MFA, based in Washington, DC, is an advocacy, education, and communications organization established

to enable hedge fund and managed futures firms in the alternative investment industry to participate in public

policy discourse, share best practices and learn from peers, and communicate the industry’s contributions to the

global economy. MFA members help pension plans, university endowments, charitable organizations, qualified

individuals and other institutional investors to diversify their investments, manage risk, and generate attractive

returns. MFA has cultivated a global membership and actively engages with regulators and policy makers in Asia,

Europe, North and South America, and many other regions where MFA members are market participants.

2 The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with more than 1,900 corporate members in over 60 countries. AIMA’s fund manager

members collectively manage more than $2 trillion in assets. AIMA draws upon the expertise and diversity of its

membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement,

educational programmes and sound practice guides. AIMA works to raise media and public awareness of the value

of the industry. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and

direct lending space. The ACC currently represents over 80 members that manage $350 billion of private credit

assets globally. AIMA is committed to developing skills and education standards and is a co-founder of the

Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard

for alternative investment specialists. AIMA is governed by its Council (Board of Directors). For further information,

please visit AIMA’s website, www.aima.org.


STANDARD CERTIFICATION OF

DEA CLIENT INFORMATION

FIA Template Questionnaire

A. DEA Due Diligence Questions for DEA Clients

Question / Description Response

DEA

Client

Name

A.1 Full legal name of the DEA Client.

(the "Firm"), on behalf of its advised funds/accounts.

DEA

Client LEI

A.2 Legal Entity Identifier (or equivalent) of the DEA Client.

DEA Client

Jurisdiction

A.3 Location of the DEA Client. EEA: UK

EEA: Other

USA

Other:(please specify)

DEA Client

Authorisation

Status

A.4 Describe the legal status of the DEA Client regarding access to European trading venues under MiFID II. For example, is the DEA Client authorized as an investment firm under MiFID II, exempt under MiFID II, etc.

MiFID II Investment Firm

UCITS Management Company

AIFM

Exempt: Third Country

Other: (please specify)


DEA Client

Governance

A.5 Please describe the governance and ownership structure of the DEA Client.

Partnership

Limited Partnership

Limited Liability Company

Corporation

Cooperative


More information is available:

On the Firm’s Form ADV, Part I, Schedules A & B

(https://www.adviserinfo.sec.gov/IAPD/default.aspx)

Through the Companies House portal

(https://beta.companieshouse.gov.uk/) Other: (please specify)

A.6 Please describe the ability of the DEA Client to meet its financial obligations to the DEA Provider.

The Firm's funds/accounts maintain clearing arrangements

with providers that contractually require daily margining.

Other:

A.7 Please disclose any disciplinary actions brought by EU regulators or by trading venues against the DEA Client, which:

• Relate to the relevant trading activity; and

• Were brought within the preceding five year period.

None

Disclosed below:

https://www.adviserinfo.sec.gov/IAPD/default.aspx

https://beta.companieshouse.gov.uk/


3 “Relevant Markets” are defined in this template as any regulated market or multilateral trading facility authorised under Title III of Directive 2014/65/EU to which the prospective DEA Client wishes to access through the DEA Provider.

DEA

Client

Activity

A.8 Describe the DEA Client’s historical trading pattern

and behaviour during the normal course of business on

Relevant Markets3 that will be accessed via the prospective DEA arrangement? (Please answer with reference to asset classes traded during the last 2 years, in what capacities and, trading frequency).

Firm is a buy-side firm, trading in:

Futures ETF (Exchange Traded Funds) Equities Options Other:

The Firm is a pre-existing DEA Client with two years

of trading history with the DEA Provider.

The Firm is a prospective DEA Client or does not

have a trading record of two years with the DEA

Provider, and thus, provides the below information:

Trading Strategies: Arbitrage

Event Driven

Special Situation

Long / Short

Long only

Quantitative Research

Others: (please specify)


A.8 (A.8 continued) Execution Strategies: Volume Participation

VWAP

TWAP

MOO

MOC

Target Close

Dark Liquidity seeking



A.9 Where the DEA Client intends to undertake Relevant Markets to be accessed via the DEA arrangement, please give a general description of:

• The types of trading strategies;

• Any automated investment or execution strategies;

• The level of expected trading; and

• The level of expected order volume.

The Firm is a pre-existing DEA Client with two years of

trading history with the DEA Provider and does not plan to

make material trading changes from the prior two years

with respect to the types of trading strategies, automated investment or execution strategies, the level of expected

trading, or the level of expected order volume.

The Firm does not satisfy the above criteria, and thus,

provides the following information regarding its trading: Trading Strategies:

Arbitrage

Event Driven

Special Situation

Long / Short

Long only

Quantitative Research

Others: (please specify )

Execution Strategies: Volume Participation

VWAP

TWAP

MOO

MOC

Target Close

Dark Liquidity seeking


Expected Trading and Order Volume:


A.10 Will the DEA Client be classified as a “market maker” (as defined in Article 4(1) (7) of MiFID II)?

Yes

No

A.11 Will the DEA Client have a direct relationship with the trading venue to which the DEA arrangement relates?

Yes

No

A.12 Will the DEA Client be classified as a clearing member in relation

to any relevant CCP involved in a clearing process linked to the DEA Services?

Yes

No

A.13 Please describe the operational setup and systems that the DEA Client uses – or plans to use.

The Firm uses:

Proprietary Systems

DEA Provider Systems

Third-Party System:



A.14 Please describe all pre- and post-trade risk controls that the DEA Client applies or will apply to its trading strategies on the Relevant Markets to be accessed via the DEA arrangement.

Pre-Trade Risk Controls: Price Collars

Volatility Awareness

Maximum Buy/Sell Quantity Limits

Repeated Automated Execution Throttle

Outbound Message Rate

Market Data Reasonability

Kill Switch


Post-Trade Risk Controls:

Post-Trade Limits

Order Fill Validity

Drop Copy Order Reconciliation


A.15 If the DEA Client is using - or plans to use - third party trading software, please describe the pre-trade controls provided.

Does not plan to use third party trading software.

Plans to use DEA Provider trading software.

Plans to use third party trading software. See above

(A.14) for a description of pre-trade risk controls.


A.16 Please describe the real-time monitoring systems the DEA Client applies or will apply to its trading strategies on the Relevant

Markets to be accessed via the DEA arrangement have in place?

The Firm uses: Real-time monitoring to ascertain that the Firm’s DEA

trading strategies are performing as intended.

Human supervision during trading hours from Trading and

Risk Control functions/departments.

Monitoring programs to provide real-time alerts to assist

staff in resolving issues in a timely manner. Internal procedures, which are designed to ensure issues

are resolved in a timely manner.


A.17 Please describe the responsibilities within the DEA Client for dealing with actions and errors.

The Firm has:

Escalation procedures to alert key control

functions/departments of significant Firm DEA trading

strategies systems issues.

Internal policies and procedures, which require the

reporting of actions and errors to an independent control

function. Identified, for regulatory actions and errors, individuals

from its Trading, and Compliance and/or Risk

Control functions/departments to serve as points of contact for trading venue personnel.



B. Clients Providing DEA service to their clients through Sub-Delegation4 [please complete]

Question / Description Response

Sub-

Delegation

B.1 Are you providing Sub-Delegation? (Yes / No) Yes

No

B.2 Do you comply with the requirements set out in Article 22(3) of RTS 6? Yes

No

Not Applicable

B.3 Do you carry out an annual due diligence assessment (as per Article 23 of RTS

6)? Yes

No

Not Applicable

B.4 Are you using a due diligence framework which covers substantively the same topics as this questionnaire?

Yes

No

Not Applicable

4 This section is only relevant where a DEA Provider allows its DEA Clients to offer sub-delegation.


C. Submission and Contacts [please complete]

DEA Provider

DEA Client

Name

DEA Client

Compliance

Contact

DEA Client

DDQ

Submitted by

Date of

DEA Client

DDQ

Submission

mfa-aima standard certification fia template …€¦ · 1 standard certification of dea client...

Documents