Investment Funds Update: Europe - Issue 7, 2015

August 07, 2015

Dechert's investment funds update discusses the key legal and regulatory updates for the funds industry from the primary European asset management centres and fund domiciles.


AMF Publishes 2015 Risk Mapping

The AMF published its 2015 mapping concerning the main risks affecting the financial markets and analysing highlights statements regarding market developments and financing of the economy, but also the organization of markets and intermediation, as well as household savings and fund management.

Read the AMF's 2015 risk mapping.

AMF Publishes 2014 Key Figures of Asset Management

The French Financial Market Authority has posted a study on the 2014 key figures of asset management inside highlights the strong activity of the Paris place.

Read the AMF's 2014 key figures of asset management.

Compliance of the AMF's Doctrine with AIFMD

The AMF has updated internal regulations to implement the provisions of the AIFMD, including:

Risk Management Within Asset Management Companies

Two documents relating to the risk management system within portfolio management companies have been updated by the AMF:

Management Mandate / "Retail Clients"

The AMF has updated the Position-recommendation 2007-21 – “Professional obligations towards retail clients imposed on investment services providers managing a portfolio on behalf of a third party”, in order to enhance investor protection and practices framework for portfolio managers with regard to non-professional clients who sign an individual management mandate. In particular, the amendments are focused on the introduction of (i) specific principles already applicable in the area of collective portfolio management and (ii) protective provisions for clients signing mandates an individual management mandate mainly invested in unlisted securities.

Read the AMF's Position-recommendation 2007-21 – Professional obligations towards retail clients imposed on investment services providers managing a portfolio on behalf of a third party.



Finance Ministry Proposes Changes to German Fund Taxation

The draft bill proposed by the Finance Ministry for discussion purposes contains significant changes to the German tax environment regarding funds and investment activities, in particular a complete revision of the German fund taxation regime and the abolishment of the 95 percent participation exemption for gains from portfolio shareholdings. The changes which remain subject to further political decisions shall generally come into effect on 1 January 2018.

Read the Dechert OnPoint about the proposed changes.

Annex IV Reporting Expected to Start at 10 August

In July 2015, BaFin has announced that the first reporting phase for AIFMs and individual AIFs according to section 35 KAGB is expected to start at 10 August 2015. Reports shall be submitted until 21 August 2015. The reporting date has been postponed several times in the past due to technical issues with the ESMA system.

Investment Statistics as of 30 June 2015

In July 2015, the German Investment Fund Association BVI has issued its latest investment statistics report dated 30 June 2015, giving an overview of the net assets and net sales within the German investment fund and asset management markets. The statistics are broken down by asset class and provider. They provide information on net assets and net inflows of investment funds and assets outside investment funds.



New Guidance for Boards of Funds and Management Companies

The Central Bank has published an update in relation to its approach to Boards of Funds and Fund Management Companies. This includes:

  • Feedback on CP86
  • Consultation on Delegate Oversight
  • Guidance on new and pending requirements

The Central Bank has separately issued a Q&A on the interpretation of this guidance as regards director’s time commitments.

Irish Funds Permitted to Use Stock Connect

The Central Bank clarified on 15 July 2015 the circumstances under which Irish authorised funds, both UCITS and AIFs, will be permitted to use the Shanghai-Hong Kong Stock Connect system. This clarification was included in revised editions of the UCITS and AIFMD Q&As, respectively.

Further information is available in our recent update. 

New UCITS Q&A – 6th Edition Published

Read the new sixth edition of the UCITS Q&A. 

Further information on the ICAV and Shanghai-Hong Kong Stock Connect system, respectively is available from the Dechert publications below:

  • Shanghai-Hong Kong Stock Connect
  • Ticking all the Right Boxes! Irish Collective Asset-management Vehicles Act 2015 Signed Into Law

AIFMD Q&A – 14th Edition Published

The Central Bank published a 14th edition of the AIFMD Q&A on 15 July 2015. The new question relate to the Shanghai-Hong Kong Stock Connect system and investments in unregulated funds.

Further information on the ICAV and Shanghai-Hong Kong Stock Connect system, respectively is available from the Dechert publications below:

Latest Fund Statistics for Ireland 

The latest fund statistics for Ireland, published by the Central Bank of Ireland, show that 116 new funds were established in June 2015.



Draft Law N. 6845 Published

The Luxembourg draft bill N. 6845, published on 5 August 2015 (i) transposes directive 2014/91/EU of the European Parliament and of the Council of 23 July 2014, amending directive 2009/65/C on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions, (ii) amends the Luxembourg law of 17 December 2010 on undertakings for collective investment and (iii) amends the law of 12 July 2013 regarding alternative investment fund managers, by including, amongst other changes, a new article 7bis on the conditions for granting authorization and which introduces the obligation for certain managers to have their accounting documents verified by an independent auditor. 

CSSF Lifts Suspensions on Trading in Certain Financial Instruments in Relation to Greece

Following recent developments concerning the situation in Greece, the Commission de Surveillance du Secteur Financier (CSSF) has decided to lift the suspensions announced by means of CSSF press releases 15/28 dated 30 June 2015 and 15/29 - please refer to our previous coverage in issue 6 of Dechert's European funds update - on trading in the financial instruments issued by certain entities on the markets of the Luxembourg Stock Exchange. 

Read the CSSF's press release: "Lifting of the Suspension of the Financial Instruments in Relation to the Situation in Greece" (24 July 2015).

Luxembourg Law of 23 July Implementing the Capital Requirement Directive

The law of 23 July 2015 which implements Directive 2013/36/EU in relation to access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms has been published. Among others, the law modifies certain provisions of the law of 5 April 1993 on the financial sector (including introduction of a cap on variable remuneration) and applies to all credit institutions and to certain investment firms.

Read the law in full (in French).

Luxembourg Holds Presidency of the Council of the EU for 12th Time

One of Luxembourg’s priorities, as it takes on presidency of the Council of the European Union, is to stimulate investment to boost growth and employment. To that effect, Luxembourg aims to implement the European Fund for Strategic Investments which seeks to raise up to €315 billion to finance strategic investment projects that will provide added value to the European Union. It will also promote the Capital Markets Union in order to enable capital markets to play a bigger role in the financing of the economy. Other projects include the banking structural reform and negotiations on a new legislative proposal regarding the resolution of market infrastructures.

Read the program and priorities.

Further details. 



HMT and FCA launch Financial Advice Market Review

HM Treasury and the FCA launched a review of the UK market in retail financial advice on 3 August 2015, to be led by HM Treasury and the FCA and will include an expert advisory panel of 12 to 15 senior figures representing financial services providers, financial advisors and consumer representatives.

The objectives of the review are to examine:

  • The advice gap for those people who want to work hard, do the right thing and get on in life but do not have significant wealth.The regulatory or other barriers firms may face in giving advice and how to overcome them.
  • How to give firms the regulatory clarity and create the right environment for them to innovate and grow.
  • The opportunities and challenges presented by new and emerging technologies to provide cost effective, efficient and user friendly advice services.
  • How to encourage a healthy demand side for financial advice, including addressing barriers which put consumers off seeking advice.

The review will gather evidence over the summer with a view to producing a consultation paper in autumn 2015. The consultation exercise will close by end 2015 with a view to producing proposals ahead of Budget 2016.

Read: "Major new review to radically improve access to financial advice launched".

Read: "Statement on the Financial Advice Market Review".

Tax Proposals in Summer 2015 Budget to Affect UK Asset Managers

The UK Summer Budget was announced on 8 July 2015, and included a number of unexpected tax proposals affecting the UK asset management industry, including proposed changes to the taxation of carried interest and performance related returns. 

Read Dechert update: "The UK Summer Budget - Private Equity and Investment Management".

FCA Publishes Findings of Financial Benchmarks Review

The FCA published a thematic review report (TR15/11) on 29 July 2015, into the findings of its review of firms' oversight and controls relating to financial benchmarks carried out between August 2014 and June 2015.

The FCA had sought to assess the extent to which firms had responded to historic misconduct relating to benchmarks and failings highlighted by benchmark enforcement cases. It also wanted to understand whether firms had implemented appropriate oversight and controls to manage the risks posed by their involvement in benchmark activities.

The FCA found that all firms reviewed had made changes to their approach to benchmark activities, although there were a number of areas where further action is needed to manage the risks of the benchmark activities appropriately. The application of lessons learned from the past had been uneven across the industry and often lacked the urgency required given the severity of recent failings.

The report sets out key messages for firms and provides examples of good and poor practice the FCA saw at the sample of banks and broking firms it assessed.

Read: "TR15/11: Financial Benchmarks: Thematic Review of Oversight and Controls". 

English and Scottish Limited Partnerships Permitted by Jersey to Become Jersey AIFs

A new regulation came into force in Jersey on 14 July 2015, which permits English and Scottish limited partnerships to elect, subject to certain conditions, to be regulated in Jersey as Jersey AIFs. Such limited partnerships may be treated as "non-EU AIFs" for the purposes of the AIFMD by virtue of being authorised in Jersey by the Jersey Financial Services Commission.

To be eligible for the election, the relevant limited partnership must:

  • Be registered in England or Scotland under the Limited Partnerships Act 1907 of the United Kingdom.
  • Have a governing body which is:
    • a Jersey company,
    • a limited partnership, an incorporated limited partnership or a separate limited partnership whose general partner is a Jersey company, or
    • a limited liability partnership at least one of the partners of which is a Jersey company.
  • Not have a registered office, head office or principal place of business outside Jersey.
  • Keep a register of limited partners or a duplicate copy of the register at the registered office or head office of the governing body in Jersey.

Separately, the FCA is consulting (in CP15/8) on proposed guidance to be included in the Investment Funds sourcebook (FUND) under which an unauthorised AIF in the form of an English limited partnership, which does not have a “registered office”, should use its principal place of business to determine the place where the AIF is established, with the consequence that an English limited partnership with a principal place of business in Jersey would be considered a non-EEA AIF. The position of Scottish limited partnerships is not specifically considered in this draft guidance. The consultation closed in May 2015 but no final rules have yet been published.

Read "CP15/8: Quarterly Consultation Paper No. 8". 



AIFMD – ESMA Issues Advice on Extension of the AIFMD Passport

On 30 July ESMA issued:

  • Its advice on extension of the AIFMD passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs) (the “Advice”).
  • Its opinion on the functioning of the passport for EU AIFMs and the national private placement regimes (NPPRs) (the “Opinion”).
In its Advice, ESMA assessed six jurisdictions – Guernsey, Hong Kong, Jersey, Singapore, Switzerland and the USA. The Advice concludes that no obstacles exist to the extension of the passport to Guernsey and Jersey, while Switzerland will remove any remaining obstacles with the enactment of pending legislation. No definitive view has been reached on the other three jurisdictions.

The Opinion contains ESMA’s preliminary assessment of the operation of the EU passport and NPPRs. ESMA’s preliminary view is that, given the short time period that has elapsed since the implementation of the AIFMD in EU Member States, a definitive assessment of their functioning is difficult and would recommend preparing a further opinion after a longer period.

However, ESMA has noted in the use of the EU passport divergent interpretations between EU member state regulators on what constitutes “marketing” “material changes” and a “professional investor”, and varying registration fees.

Read ESMA's press release: "ESMA advises on extension of AIFMD passport to non-EU jurisdictions" (30 July 2015). 

Read ESMA's advice to the European Parliament, the Council and the Commission on the application of the AIFMD passport to non-EU AIFMs and AIFs.

ESMA's opinion to the European Parliament, Council and Commission and responses to the call for evidence on the functioning of the AIFMD EU passport and of the National Private Placement Regimes.

On 22 July, ESMA updated its Q and A on the application of the AIFMD in two areas, reporting of AIFs by non-EU AIFMs marketing in the EU under Article 42 AIFMD, and reporting AUM.

ESMA has confirmed that when a non-EU AIFM reports information to the regulator in whose jurisdiction it is marketing as required by Article 42 AIFMD, only AIFs marketed in that jurisdiction have to be taken into account for the purpose of this reporting.

Regarding AUM, ESMA has clarified the that AIFMs should include AIFs created during the reporting period in calculating the total value of assets under management of the AIFM for that reporting period.

Read the updated Q&A on the Application of the AIFMD.

Capital Markets Union - New Resolution from European Parliament 

The European Parliament published a press release on 9 July 2015 announcing the adoption of a non-binding resolution on building a capital markets union (CMU), generally supporting the CMU.

Read the European Parliament's press release: "Capital Markets Union should ease cross-border investment and finance for SMEs" (9 July 2015). 

Read the provisional text to the resolution. 

EMIR – New Counterparty Classification Letter

ISDA published a new standard form classification letter on 14 July 2015 that will enable counterparties to notify each other of their status for clearing and other regulatory requirements under EMIR.

The letter and accompanying guidance note are available below:

Read ISDA's explanatory memorandum to the form of the ISDA EMIR Classification Letter.

Read ISDA's press release: "ISDA Publishes EMIR Classification Letter" (14 July 2015).

UCITS V – ESMA Consults on Proposed Guidelines on Sound Remuneration Policies Under UCITS V Directive

ESMA has launched a consultation paper on 23 July 2015 on proposed guidelines on sound remuneration policies under the UCITS V Directive and AIFMD.

The proposed Guidelines aim to ensure a convergent application of remuneration provisions and will provide guidance on issues such as proportionality, governance of remuneration, requirements on risk alignment and disclosure. The final Guidelines will apply to UCITS management companies and national competent authorities.

The consultation also proposes a revision of the AIFMD Remuneration Guidelines by clarifying that in a group context, non-AIFM sectoral prudential supervisors of group entities may deem certain staff of an AIFM in that group to be identified staff for the purpose of their sectoral remuneration rules.

ESMA will aim to finalise and publish the UCITS Remuneration Guidelines and a final report by Q1 2016 ahead of the transposition deadline for UCITS V Directive (18 March 2016). The consultation period will run until 23 October 2015.

The press release and consultation paper are available here:

Read ESMA's press release "ESMA consults on UCITS remuneration guidelines" (23 July 2015). 

Read ESMA's consultation paper: "Guidelines on sound remuneration policies under the UCITS Directive and AIFMD". 


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