Global Registration Services: Market Update Q4 2018
28 Jan 2019
ESMA updated AIFMD Q&As
On 4 October 2018 ESMA updated its Q&As on AIFMD.
It includes a new Q&A which clarifies the application of the AIFMD notification requirements in relation to AIFMs managing umbrella AIFs on a cross border basis.
ESMA updated Table of MoUs
On 30 October 2018 ESMA published an updated Table of AIFMD MoUs signed by the EU authorities.
UK Temporary Permissions Regime ("TPR") EEA to be allowed to add new sub-funds following Brexit
As noted in our recent client update HM Treasury on 7 December 2018 published a draft of the Collective Investment Schemes (Amendment) (EU Exit) Regulations 2019. These will allow an EEA Member State which has notified the UK FCA of their intention to enter the UK's TPR prior to 29 March 2019 ("Exit Day") to include a sub-fund in the TPR post Exit Day.
The FCA will allocate each investment fund that has availed of the TPR a three month landing slot during which they will be required to submit: an application for recognition (for marketing to retail investors) or a notification (for marketing to professional investors only), if they wish to continue marketing in the UK following expiry of the TPR.
The FCA expects the first landing slot will be between October 2019 and December 2019 and that the last will be from January 2021 to March 2021. Each investment fund must submit the application / notification during the three month period to which they are allocated, failing which the marketing of the fund in the UK will no longer be permitted on the same basis as before Exit Day.
Draft bill proposes easy access for foreign investment funds to Danish retail investors
On 5 October 2018 the Danish Government published a draft bill for public consultation. Which if approved, will amend:
- The taxation of Danish individuals' investment in funds classified for Danish tax purposes as "investment companies"; and
- The Danish dividend tax liability for non-Danish investors' investments in Danish investment funds.
These proposed amendments aim to:
- Remove tax barriers for Danish individuals' investments in non- Danish mutual investment funds (especially exchange-traded funds);and
- Attract capital to Danish investment funds.
They are due to take effect from the income year 2019.
European Commission evaluation on Distance Marketing of Financial Services
On 4 January 2019 the European Commission's December 2018 evaluation and fitness check roadmap on Distance Marketing of Financial Services closed. It aims to evaluate the Distance Marketing of Financial Services Directive ("Directive"), in line with the Better Regulation Principles. The evaluation collated information on the effectiveness of the Directive, particularly, in relation to the following aspects:
- Unsolicited services and communications;
- Regulatory choices by Member States;
- Relationship between product specific legislation in the field of retail financial services, the e-commerce framework and horizontal consumer protection rules;
- Scope of services covered;
- Information disclosure; and
- Right of withdrawal
AMF procedures on the review of marketing communications to retail investors
On 8 October 2018 the AMF announced the implementation of new internal priorities regarding the marketing of financial products to retail investors in France. The result of these will be that the AMF will no longer review the marketing materials of certain funds, for example, UCITS prior to their disclosure to retail investors. Going forward the AMF will prioritise the supervision of marketing materials which will be actually used post communication.
The new procedure commenced on 2 November 2018, initially as part of a one year trial phase.
The AMF outlined that the marketing materials of the following funds no longer have to be submitted for review prior to their use:
- Structured funds;
- Unit-linked funds;
- Funds using an investment strategy known as "plain vanilla";
- "Other AIF" (as described in the article 214-24-III of the "Code Monétaire et Financier"); and
- Other investment funds marketed exclusively to professional investors only.
For the following funds marketing materials must continue to be submitted for review prior to their use:
- Real estate investment schemes ("FCPI");
- Corporate mutual funds ("FCPE");
- Venture capital funds for retail investors and specific tax funds ("FCPR", "FIP", "FCPI", and "SOFICA").
The purpose of this new procedure is to concentrate AMF resources on riskier products. The rules for establishing marketing materials remain unchanged, they must be compliant with French regulation and the marketer/producer is still responsible for the information which is provided to investors.
The AMF communication is currently available in French only.
BaFin changes on administrative policies on performance fee structures in line with IOSCO Good Practice for Fees and Expenses
On 18 October 2018 BaFin notified EU regulators that it will require UCITS registered for distribution in Germany to be compliant with BaFin's principles on performance fees.
The changes were communicated on a regulator-to-regulator basis only. BaFin has yet to release a public statement.
BaFin states that UCITS distributed in Germany must comply with the following:
- Calculation period: The calculation period for determination of a performance fee must be at least 12 months.
- Calculation method: The performance fee calculation method must provide a loss carry forward/ high water mark, which covers at least the five previous years.
- Quantification of the performance fee: A percentage of the maximum amount of the total performance fee must be indicated.
- Cap on the performance fee: The amount must be limited in relation to the total assets of the fund.
BaFin will review performance fee provisions in all new applications for the distribution of UCITS in Germany as well as in amendment applications and check whether they comply with the above principles. In relation to UCITS which are already registered for distribution in Germany, BaFin have advised the German Investment Funds Association that these UCITS need to comply with the principles no later than 31 December 2019. If UCITS do not meet these criteria, it is likely that BaFin will restrict such UCITS from distribution in Germany.
Publication of German tax figures
On 2 November 2018 the German Ministry of Finance published an update extending the deadline for publication of German tax figures in accordance with section 13 of the German Ministry of Finance’s circular of 8 November 2017 from 31 December 2018 to 30 June 2019.
AFM updated policy regulation on the Provision of Information
On 31 December 2018 the Dutch AFM published an updated version of its policy relating to the Regulation on the Provision of Information, following an open consultation. The updated policy adds new interpretations and updates existing ones. It is available in Dutch only.
The policy provides guidelines on how to comply with the Dutch laws and regulations in relation to the marketing of financial products.
Examples of the changes include:
- Clarification and additional content to the passage on comparisons between financial products;
- Removal of an unclear passage on historical returns; and
- Providing an example of an advertising site in section 2.3.
New cross border financial services regime
On 24 October 2018 the Swiss Council published draft ordinances to the Financial Services Act ("FinSA") and the Financial Institutions Act ("FinIA") and initiated a consultation on the ordinances, until 6 February 2019. The draft ordinances are currently available in Swiss-German only.
The draft ordinances include a new regime for the provision of cross border financial services and the offering of securities into Switzerland which may greatly affect the manner in which foreign financial service providers had previously approached the Swiss market. The new regime will bring into line the Swiss approach to principles already been recognised in a European context. It sets out strict consequences for breaches of the regulation.
CSA final version of the alternative mutual fund amendments
On 4 October 2018 the CSA announced the final alternative mutual fund amendments to NI 81-102 (the "Final Rules"). The Final Rules became effective on 3 January 2019. These changes contain a number of significant modifications to the amendments to NI 81-102 which were originally proposed in September 2016. They aim to provide retail investors with greater access to alternative investment strategies, including leveraged and market neutral portfolios.
On 1 November 2018 the SFC issued a Circular to intermediaries to notify them of the publication of the Statement on regulatory framework for virtual asset portfolios managers, trading a platform operator.
SFC circular to intermediaries
On 23 November 2018 the SFC published a Circular to intermediaries to notify them of the new arrangements for submission of notifications and delivery of letters of approval.
SFC consultation on the Code on Unit and Mutual Funds
On 6 December 2018 the SFC published consultation conclusions on proposed changes to the Code on Unit Trusts and Mutual Funds ("UT Code") (Note 1).
The proposals set out in the consultation paper (Note 2) will be implemented, subject to some changes and clarifications. These include changes to the calculation method for funds’ derivatives investments and clarification of the enhanced obligations of trustees and custodians.
Subsequent amendments to the SFC Code on MPF Products ("MPF Code"), Code on Pooled Retirement Funds ("PRF Code") and Code on Investment-Linked Assurance Schemes ("ILAS Code") will also be implemented, with certain amendments. The revised UT Code, MPF Code, PRF Code and ILAS Code came into effect following gazettal, on 1 January 2019 (Note 3).
The SFC will publish FAQs which will offer further guidance to the industry regarding the implementation and transition arrangements for the revised UT Code (Note 4).
Updated confirmations for investment products
On 17 December 2018 the Investment Products Division of the SFC published the following updated/new documents. Applicants must use them for submissions received on or after 1 January 2019.
The updated and new documents have been added under the following sections:
- Unit Trusts and Mutual Funds;
- Schemes under Mutual Recognition Arrangements;
- Mandatory Provident Fund Products and Pooled Retirement Funds;
- Investment- Linked Assurance Schemes; and
- Private Open-ended Fund Companies.
SFC updated FAQs in relation to open-ended fund companies
On 28 December 2018 the SFC published updated FAQs relating to open ended fund companies. The update includes an amendment to Question 20.
MAS amendments to various regulations
As noted in our recent client update on 31 October 2018, MAS published amended versions to the following regulations on 8 October 2018:
- Securities and Futures Act (Chapter 289) (the "SFA");
- Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005 (the "SFR");
- Securities and Futures (Classes of investors) Regulations 2018; and
- Practitioner's Guide to the Collective Investment Schemes Regime under the Securities and Futures Act (Cap.289).
CCR updated procedure for application of foreign funds
In October 2018 the CCR announced an online platform for the application of foreign funds in Chile. From December 2018, applications of foreign funds must be submitted via the CCR platform on the CCR website. There will be no changes to the documents that are required as part of the application. The timeline for processing applications will not be affected by the new submission process.
The yearly renewal process is still required to be completed via email until further notice. By January 2019, the CCR plans to make the CCR platform operative for the annual renewal as well. Foreign funds or service providers can request access to the platform here.
How the Maples Group can help
The Maples Group's Global Registration Services ("Maples Group GRS") supports UCITS1 and AIFMs1 in their multi-market distribution strategies by providing an integrated global network of experts coordinated by a dedicated central team supporting all legal and regulatory aspects governing the cross border marketing of investment funds on both a private placement and public offer basis.
Should you require any further information or assistance in this regard, please do not hesitate to contact the persons below or any member of the Maples Group GRS team.
1 Domiciled in Ireland and Luxembourg.
Head of Global Registration Services Dublin
T: +353 1 619 2708