Investment Funds Update: Europe - Issue 3, 2017

April 05, 2017

Legal and regulatory updates for the funds industry from the key asset management centres and primary European fund domiciles.



Belgian FSMA Issues Two Communications on the Marketing of Units in EEA and Non-EEA AIFs

The Belgian Financial Services and Markets Authority (“FSMA”) published two communications dated 24 February 2017 on the marketing and notification of units in alternative investment funds (AIFs) by alternative investment fund managers (AIFMs) under Articles 32, 36 and 42 of the Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD). The forms which must be completed and submitted by the AIFMs are attached to the FSMA’s communications. These forms correspond to the standardized Article 32, 36 and 42 AIFMD notification forms.

FSMA's Position Regarding the Application of the Unfair Terms Legislation in the Context of the Offering of Securities to Consumers

The position dated 30 January 2017 contains a series of recommendations and interpretations of the Economic Law Code by the FMSA and is directed to all companies offering investment instruments to consumers within the Belgian territory. Issuers and distributors will have to carefully review the issuance, marketing and distribution of financial products to Belgian consumers. The Communication is relevant to structured notes as well as non-structured notes, retail issues as well as private placements and passported as well as non-passported issues. Issuers and arrangers will have to review the structure and content of offering document, in order to be able to comply with the Communication. The terms and conditions of specific products will have to be reviewed in light of the Communication, especially modification clauses, call options and substitution clauses.

FSMA's Communication on the Registration of Small Belgian AIFM

The Communication issued on 27 March 2017 describes the registration formalities for small Belgian AIFM (i.e. AIFM of portfolios of AIFs whose assets under management does not exceed the thresholds, calculated in accordance with Article 2 of Commission Delegated Regulation (EU) No 231/2013).

New Status for Crowdfunding Platforms

The Belgian law of 18 December 2016 on crowdfunding has entered into force on 1 February 2017. It creates a specific status for alternative financing platforms and subjects these to initial authorization and operating requirements under the supervision of the FSMA. The new law prescribes “MiFID-light” operating rules setting out the usual professional duties, information requirements, procedures on conflicts of interest and appropriateness tests. It also provides for a prospectus exemption for public offerings through an alternative financing platform for less than EUR 300,000 with a maximum of EUR 5,000 per individual investor. Tax benefits are available to investments in or loans to alternative financing platforms.

BEAMA Press Release - Figures UCI-Sector 3rd Quarter 2016

The Belgian Asset Managers Association (BEAMA) published on 25 January 2017, her press release about the figures of the UCI-sector related to the 3rd quarter of 2016.



Significant Update of the General Regulations of the AMF ("GRAMF")

The Arrêté of 27 February 2017 and published to the Official Journal on 7 March 2017 has amended significantly the General Regulations of the AMF (the Autorité des Marchés Financiers - “AMF”, the French financial markets authority).

The updated GRAMF now includes, among others, the following provisions related to:

  • the publication of the transactions in shares or units of UCITS or AIFs (such as exchange-traded funds, “ETFs”) listed on a regulated market carried out by investment service providers, within the framework of their post-trade transparency obligations, under certain conditions;
  • the marketing in France to retail clients of AIFs from a third country;
  • the financial delegation of UCITS and AIFs management (cf. see below); and
  • the implementation of redemption gates in UCITS and AIFs (cf. see below).

The Arrêté is available (in French only)

Terms for Implementing Gates in UCITS and AIFs - New AMF Instruction and Update of the AMF Instructions and Position-Recommendation

Pursuant to the authorisation for open-ended funds to implement gates or liquidity restrictions when warranted by exceptional circumstances, the AMF has published on 15 March 2017 a new Instruction n° 2017-05 addressing this newly created legal regime.

Among others, this Instruction provides guidance on:

  • the requirement to describe the implementation and use of gates in a fund’s prospectus, rules and/or by-laws;
  • the information to be provided to unitholders or shareholders in case of any changes in a fund’s prospectus, rules and/or by-laws when gates are implemented;
  • thresholds for triggering the gates;
  • the maximum duration of such gates.

As a result, the AMF has also updated its policy to incorporate this possibility offered to certain French funds to provide redemption gates.

The AMF news release is available (in French only)

Implementation of Five FROG Innovations - Update of the AMF Policy

Further to the launch of the FROG (“French Routes and Opportunities Garden”) workshop between the AMF and the AFG (“Association Française de la Gestion Financière”, the French professional association of asset managers) in 2016 aiming to increase French funds’ international competitiveness, the AMF has updated its doctrine to take into account FROG’s recommendations. The update are as follows:

1. AMF French collective investment scheme (CIS) classifications

Further to FROG’s proposals and the public consultation launched in June 2016 on the abolition of AMF specific classifications of French collective investment schemes, used to differentiate certain French funds according to the primary nature of the investments being made, the AMF has published its feedback on 15 March 2017. The AMF has now adopted the following provisions, pursuant to which:

  • certain AMF classifications could be maintained, on an optional basis;
  • the “Diversified” AMF classification will be abolished as from 31 December 2017;
  • CIS not using the AMF classification will be required to inform the AMF under which category of funds they fall into as part of the statistical report to the Banque de France and the European Central Bank.

The feedback from the public consultation on the abolition of its classification of collective investment schemes and the AMF news release is available (in French only)

2. Presentation of management fees for UCITS and certain AIFs

Following its policy update on November 2016 pertaining to the presentation of management fees for UCITS and certain AIFs, the AMF has clarified on 15 March 2017 in the latest amended Instructions, the content of the Fund’s prospectus, rules or by-laws, specifying that, on an optional basis, the management company can merge the financial management fees and external administrative fees. In such a case, the relevant section would be entitled “financial management fees and external administrative fees of the management company”.

3. Extension of the scope of financial management delegation

Pursuant to the update of the GRAMF amending articles 313-77 and 318-58, French management companies can now delegate their financial management functions not only to (i) other management companies authorised to manage UCITS and AIFs but also to (ii) other entities authorised to provide portfolio management services and to (iii) authorised entity established in a third country subject to the condition that there is effective cooperation between the AMF and the supervisory authorities of the relevant country. AMF doctrine has therefore been updated.

4. Possibility to retain the historical reports of past performance (« track record») of UCITS and AIFs in the event of a transformation of a French FCP (“Fonds Commun de Placement”, form of common funds) to a French SICAV (“Société d’investissement à capital variable”, open-ended investment companies)

The AMF has updated its policy under the Position-Recommendation n°2011-05 (Guide to the regulatory documents governing collective investments schemes) by including this new possibility offered to UCITS and AIFs subject to the condition that the Fund does not change its investment policy and management objective.

5. Update of the AMF policy in anticipation of the entry into force of European PRIIPs (Packaged Retail and Insurance-based Investment Products) Regulation

In anticipation of the entry into force of PRIIPs on 1 January 2018, the AMF has updated its policy, in order to:

  • allow French funds open to professional investors that are not subject to the obligation of drafting a KIID, to finally establish a KIID in compliance with UCITS Directive; and
  • note that from the date of entry into force of PRIIPs, certain French dedicated funds, including professional investment funds, professional specialised investment funds, professional real estate collective investment undertakings and professional private equity funds, authorising the subscription or the purchase of their shares or units to retail clients if their investment is equal or above to EUR 100 000, could be subject to the obligation to establish a KIID in compliance with PRIIPs.

The AMF news release is available (in French only)

AMF - Publication of a Guide to the Use of Stress Tests as Part of Risk Management Within Asset Management Companies

Pursuant to a public consultation launched in 2016, the AMF published on 23 February 2017 a guide aimed at French management companies presenting an overview of the stress test practices. The AMF provides general advices and examples of the implementation and use of stress tests that must be adapted specifically to all the different funds, portfolios or management companies.

The AMF Guide is available (In French only)

The news release is available

AMF - Public Consultation on Strengthening the Framework for ETFs

Further to the study on the ETFs and associated risks published on 14 February 2017 in which the AMF observed the growth of the market globally and in Europe, the French regulator wishes to update its policy accordingly in order to adapt and strengthen the French ETFs framework.

The AMF submits the three following proposals to public consultation:

  • "Proposal 1: to widen the options available to French ETFs, in certain market situations, for repaying in-kind redemption requests on the primary market (with the exception of liquidations);
  • Proposal 2: to implement an action plan in the event of significant valuation or liquidity problems on the underlying-assets market, with a view to possibly suspending subscriptions and redemptions;
  • Proposal 3: to draw up a continuity action plan in the event of a default or an event affecting a counterparty”.

Comments on these proposals must be sent before 24 May 2017.

Read the AMF Public Consultation (in French only)

AFG - Governance Charter for SICAVs

The AFG has published its Governance Charter of French SICAV (open-ended investment companies) on 20 March 2017. The objective of this Charter is to promote best practices in order to improve the quality of governance of French SICAV in the interests of investors. This Governance Charter addresses the following three principles, relating to:

  • the independence of board directors;
  • the minimum number required of independent members serving within a collegial body of a SICAV and fixing the threshold to at least one third of the members or two persons (whichever is lower);
  • the maximum number of mandates held by theses members.

SICAV are authorized to mention in their documentation if they fully comply with these measures.




BaFin Publishes Revised "MaComp" Covering Rules of Conduct, Organization and Transparency for Investment Services Enterprises

BaFin published the revised “MaComp” on 8 March 2017. The MaComp (Governing Rules of Conduct, Organization and Transparency pursuant to Sections 31 et seq. of the Securities Trading Act (Wertpapierhandelsgesetz – WpHG) for Investment Services Enterprises) comprise all requirements concerning the conduct of business rules set out in sections 31 et seq. of the WpHG. The MaComp has been revised to reflect the entering into force of the Market Abuse Regulation (EU) no. 595/2014 which governs certain aspects with regard to the analysis of financial instruments. Accordingly, these aspects previously governed in BT 5 of the MaComp were repealed. Other changes include clarifications regarding the responsibility of investment services enterprises who make available to clients information from third-party sources.

The "MaComp" is available in German

BaFin Consults on Regulatory IT Requirements for Banking Institutions

BaFin published a draft circular on regulatory IT requirements on 22 March 2017 for banking institutions (Bankaufsichtliche Anforderungen an die IT – “BAIT”). The circular will further interpret the BaFin’s circular on minimum requirements for the risk management of banking institutions (Circular 10/2012 (BA) - “MaRisk”) and will clarify what BaFin and Bundesbank expect from the bank’s IT security standards. The BAIT will apply alongside the MaRisk.

The deadline for the consultation period of the circular will end on 5 May 2017.

The draft circular is available in German

German Parliament to amend Rules on Residential Mortgage Lending

According to press statements, the German parliament will pass the draft “Act Supplementing Financial Supervision Law” (Finanzaufsichtsergänzungsgesetz) to supplement German financial supervision provisions pertaining to measures to prevent risks to financial system stability and to modify national legislation implementing the EU Mortgage Credit Directive. The new legislation intends to add precision to existing legislation and enhance certainty in order to facilitate residential mortgage lending. The Law will also introduce additional instruments that will enable the German regulator BaFin to set certain requirements for residential mortgage lending which could include upper limits for the loan amount to the real estate value. The legislation will only apply to the financing of construction and purchase of real estate, conversion or renovation will not be covered. Follow-up financing and micro-credits will also be exempted from the new rules.

The draft bill is available in German

Investment Statistics as of 31 January 2017

The German Investment Fund Association BVI in March 2017 has issued its latest investment statistics report dated January 2017, providing 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 Central Bank Investment Firms Regulations 2017

The Central Bank published the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2017 on 13 March 2017. The new Regulations consolidate into one location all of the requirements which the Central Bank imposes on certain Investment Firms.

The Regulations are avaialble on the Central Bank of Ireland's website.

As a result of the Regulations, the Central Bank has updated its Fund Administrator Guidance and has updated the AIF Rulebook.

Central Bank Updates AIFMD Q&A and UCITS Q&A

In light of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2017 (see above), on 13 March 2017, the Central Bank published the twenty-fourth edition of the AIFMD Q&A and the sixteenth edition of the UCITS Q&A.

The AIFMD Q&A are available.

The UCITS Q&A are available.

Central Bank Guidance on Compliance with EMIR

On 24 February 2017, the Central Bank published its expectations in terms of counterparties who may face difficulties, meeting the exchange of variation margin requirements under EMIR for non-centrally cleared derivatives.

The Central Bank clarified in its EMIR FAQs that, although the deadline for compliance is 1 March 2017, it has been recognised across the EU and by IOSCO that there are operational challenges in meeting the deadline. The Central Bank will be taking a risk-based approach to compliance and expects to see counterparties making full efforts to achieve compliance at the earliest possible date.

The Central Bank EMIR FAQs are available on the Central Bank of Ireland's website.

Recent Addresses by Central Bank Personnel

Gerry Cross, the Director of Policy and Risk at the Central Bank, gave an update on the Central Bank’s approach to Brexit and links between the Asian and Irish financial systems at the Brexit and Asia: Implications for Financial Services in Ireland event. The remarks are available on the Central Bank of Ireland's website.

Michael Hodson, Director of Asset Management Supervision, gave a talk at PWC's Alternative Investment Funds Seminar on European and domestic regulatory updates and on Brexit. The speech is available.

Michael Hodson also gave an update at a KPMG seminar on preparing for MIFID II. 

Governor Philip R. Lane gave a talk at University College Cork on the role of financial regulation in protecting consumers. The speech is available.

Latest Fund Statistics

The Central Bank of Ireland has issued the latest statistics available regarding Irish funds. These statistics are located on the Central Bank of Ireland's website.



CSSF Press Release 17/06 Dated 13 February 2017

The CSSF confirmed that it follows ESMA on its opinion in relation to the requirements for UCITS share classes.

The Press Release is available in English on the CSSF website

ALFI and ILA Recommendation on VAT on Remuneration

ALFI and ILA published their recommendations on VAT on remuneration of directors of funds and their management companies.

CSSF Circular 17/650 Dated 17 February 2017

The CSSF, together with the financial intelligence unit, published Circular 17/650 to provide guidance on the practical application of Directive (EU) 2015/849 of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. The implementation of the Directive by means of the law of 23 December 2016 (which entered into force on 1 January 2017) amends Regulation (EU) No 648/2012 and repeals Directive 2005/60/EC and Directive 2006/70/EC (known as “MLDR4”) and the standard revised FATF 2012/2013.

The Circular is available (in French only) on the CSSF website

MOU Signed Between the CSSF and the FSRA of Abu Dhabi

The two authorities signed a memorandum of understanding in relation to the cooperation, consultation and exchange of information about entities under each authorities’ supervision on 6 February 2017:

The memorandum is available (in French only) on the CSSF website.

ALFI Survey 2017 on Real Estate Investment Funds

ALFI published the results of its survey on Luxembourg domiciled real estate investment funds.

CSSF Press Release 17/12 Dated 13 March 2017

The CSSF published its press release regarding the global situation of undertakings for collective investment as at the end of December 2016. 

The Press Release is available in English on the CSSF website



FCA Publishes Dealing Commission Review Findings

The FCA have published their findings from a review that analysed dealing commission expenditure across 31 investment managers. The policy statement on the use of dealing commission rules, published in May 2014, set out changes to rules and the FCA’s expectation that firms spend customers’ money with as much care and attention as if it were their own.

The majority of the 17 firms visited are still falling short of expectations. Not only were poor practices identified but some firms continued to use dealing commission to purchase non-permissible items, such as corporate access and market data services.

Due to these findings and the implementation of MiFID II, the FCA will continue to focus on the use of dealing commission and will consider appropriate action against those who breach the rules or principles. This will include more detailed investigations into specific firms, individuals or practices.

The FCA’s stated that firms which operate ‘global’ commission models must apply the FCA’s dealing commission rules to their investment management activities that take place in the UK, including COBS 11.6.

The FCA article is available

FCA to Consult on Extending the Senior Managers and Certification Regime (SM&CR) in Q2 2017

On 22 February 2017, the FCA announced that plans to consult on its proposed extension of the Senior Managers and Certification Regime (SM&CR) to all firms authorised under the Financial Services and Markets Act 2000 (FSMA) during the second quarter of 2017. The SM&CR will replace the current approved persons regime, including by placing greater regulatory responsibility on senior managers of FCA authorised firms. It took effect for firms in the banking sector on 7 March 2016.

The FCA article is available

Dechert and the Alternative Credit Council Launch Annual Private Credit Survey

Dechert and the Alternative Credit Council (ACC), an affiliate of AIMA, have launched the third annual Private Credit Survey and we strongly encourage managers of private credit funds to take a few minutes to complete it. Respondents are urged to try to answer all questions in their entirety. 

Click here to complete the Private Credit Survey »

The findings of the survey will be incorporated into the third annual ‘Financing the Economy’ report which will be released in Autumn 2017. The series of papers have been extremely well-received by policymakers, the professional public and media at large, and have helped the ACC make great strides in their advocacy efforts in the private credit space. This survey seeks to analyse in more detail the evolving role of alternative lenders in capital market financing.



EMIR - European Securities Agencies Issue Statement on EMIR Variation Margin Rules, More Entities Exempt from EMIR and ESMA Re-Affirms Commitment to Co-Operate with Non-EU Regulators on CCPs

On 23 February, the European Securities Agencies (ESMA, EIOPA and the EBA) issued a statement on variation margin exchange under EMIR. The statement confirmed that each expects EMIR’s requirements on exchanging variation margin to have been met by 1 March and also on an ongoing basis, though recognises that local regulators should generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation.

The joint statement is available

The statement for each securities agency is available below:



On 2 March, the European Commission issued a new delegated regulation exempting the central banks of Australia, Canada, Hong Kong, Mexico, Singapore and Switzerland from EMIR.

The delegated regulation is available

On 20 March, ESMA re-affirmed its commitment to recognising “third country” CCPs for EMIR purposes has signed various MoUs with non-EU regulators whose legal and supervisory framework for CCPs have been deemed equivalent to EMIR.

The associated press release is available

MiFID II - Initial Concerns Regarding Systematic Internalisers (SIs) Operating Broker Crossing Networks Noted by European Commission

On 23 March, the European Parliament published correspondence between it and the European Commission raising concerns around SI’s collecting client orders and then routing them through high-frequency traders, and so arguably creating a network operating as an unauthorised multi-lateral trading facility.

The European Commission intends to follow up on this concern on a jurisdiction by jurisdiction basis.

The correspondence is available below

ECON letter to the European Commission

Response from the European Commission

Other Regulatory Developments - How Regulatory Equivalence "Works"

Given the events of 23 June last year, the European Commission has published its working document of how it assesses regulatory “equivalence” between the EU and non-EU regimes.

The European Commission continues to endorse the equivalence process, though emphasises that any decision taken will be based on a principle of proportionality and from following a risk-based approach, and is always at the discretion of the European Commission.

Further, any equivalence declaration will always be tailored to the needs of the underlying legislation – a non-EU state should not expect a single declaration that its legislation is “equivalent” across all EU legislation.

The working document is available


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