The UK Votes to Leave the EU
On 23 June 2016, the UK held a referendum whereby 51.9% of voters opted to leave the EU. The UK will be in a position to commence exit negotiations with the EU once the new Prime Minister, Theresa May, invokes Article 50 of the Lisbon Treaty. This is a formal mechanism whereby up to 2 years of negotiations will be triggered. It is expected that Article 50 will not be invoked before the end of 2016, meaning that for the time being at least, there is no change to the status of the UCITS and AIFMD cross-border passporting regimes as they relate to the UK.
We will continue to monitor developments and we are available to discuss any concerns you may have regarding your existing or future business.
On 7 April 2016, ESMA issued two Guidelines Compliance Tables, the first setting out the competent authorities that comply or intend to comply with key concepts of AIFMD (ESMA/2013/611), and the second setting out the competent authorities that comply or intend to comply with reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of AIFMD (ESMA/2014/869).
Please click here for copies of the Guidelines Compliance Table on key concepts of AIFMD and the Guidelines Compliance Table on reporting obligations.
On 4 May 2016, ESMA issued a further Guidelines Compliance Table setting out the competent authorities that comply or intend to comply with ESMA Guidelines on sound remuneration policies under AIFMD (ESMA/2013/232).
ESMA Q&A on the Application of AIFMD
On 3 June 2016, ESMA published an updated Q&A document on the application of AIFMD and its implementing measures. The document clarifies the content of certain AIFMD rules and subscribes common approaches and practices to be undertaken by supervisory authorities. In particular, the document provides clarification on the domicile requirements of EU AIFs being marketed in the AIFM's home Member State, and on the marketing of EU feeder AIFs having a non-EU master AIF. The Q&A document also clarifies the effect of committed capital on the calculation of AuM.
Please click here for a copy of the Q&A.
On 2 June 2016, the CBI published the 19th edition of the AIFMD Q&A document which adds two new questions, namely ID 1104 which clarifies the frequency at which a review on organisational effectiveness should be conducted; and ID 1105 which clarifies the application of the rule that RIAIFs and QIAIFs are not permitted to hold shares carrying voting rights which potentially exercise significant influence over the management of an issuing body when a portion of the assets of the RIAIF or QIAIF is invested in a venture capital, development capital or private equity strategy.
Please click here for a copy of the Q&A.
Following the implementation of AIFMD in Italy, in May 2016 Borsa Italiana amended the rules of its Market for Investment Vehicles platform to allow for the listing of AIFs on the Italian Stock Exchange.
Please click here for a copy of Borsa Italiana's latest Guide to Parameters (version 34) which came into force on 13 June 2016. There is no English version available to date.
On 27 May 2015, Finanstilsynet issued a Circular which provides guidelines on the rules that prohibit the marketing of AIFs to non-professional investors in Norway. The Circular also provides guidance on the definition of "marketing" under the Norwegian Alternative Investment Fund Managers Act and provides guidance on reverse solicitation rules in Norway and when they can be relied on.
Please click here for a copy of the Circular in Norwegian. No English version is available to date. However, if you require any further details, please feel free to contact us.
On 31 March 2016, the Act Amending the Act on Investment Funds and Certain Other Acts came into force. This Act implements AIFMD in Poland.
Please click here for a copy of the Act. There is no English version available to date.
The FCA, in its July 2016 Quarterly Consultation No.13, proposed certain changes to Annex IV reporting under AIFMD. The proposals alter how full-scope UK AIFMs are to complete transparency reports for AIFs and also how AIFs managed by above threshold non-EEA AIFMs are to be reported. In particular, the FCA proposes that Annex IV reporting will be required by:
- Above threshold non-EEA AIFMs, in respect of the master fund and the feeder fund(s) where they (or an entity in the same fund management group) manage a non-EEA master AIF not marketed in the UK which has feeder funds that are either (a) non-EEA AIFs marketed in the UK or (b) EEA AIFs;
- Full scope UK AIFMs, in respect of the non-EEA AIFs being managed, even if the AIF is not marketed in the EEA provided that the AIFM would be subject to quarterly reporting for that AIF.
The consultation period for the FCA's proposals is open until 12 August 2016 and the FCA is expected to publish its final rules in the 3rd or 4th quarter of 2016.
Please click here for a copy of the FCA's Quarterly Consultation. Section 10 of the document is of particular relevance.
Capital Markets Union Action on Cross-Border Distribution of Funds
As reported in our Q3 2015 Market Update, on 30 September 2015 the European Commission released its Action Plan on Building a Capital Markets Union (SWD (2015) 183/184 final) (the "Action Plan").
As part of the Action Plan, the European Commission has commenced a public consultation on CMU Action on Cross-Border Distribution of Funds (UCITS, AIF, ELTIF, EUVECA and EUSEF) across the EU. The consultation examines regulatory and administrative barriers to the cross-border distribution of investment funds, i.e. marketing restrictions, distribution costs, regulatory fees, administrative arrangements, distribution networks, notification processes and taxation. It aims to obtain tangible examples and quantitative and financial evidence on the financial impact of the barriers.
Responses from stakeholders are invited before 2 October 2016. We are happy to facilitate any responses to the consultation you might have or alternatively, you are welcome to respond directly via the online questionnaire available here.
Please click here for the European Commission's First Status Report on the Action Plan.
ESMA Guidelines on ETFs and other UCITS Issues
On 12 April 2016, ESMA issued a Guidelines Compliance Table setting out the competent authorities that comply or intend to comply with ESMA Guidelines on ETFs and other UCITS issues (ESMA/2014/937).
Please click here for a copy.
Austria: Tax Reporting Ordinance
On 6 June 2016, the Austrian Tax Reporting Ordinance came into effect. The Ordinance was first published on 24 June 2015 and it provides instructions on the reporting of tax data for domestic and foreign investment funds, real estate funds and AIFs to the OeKB.
The Ordinance standardises the process for the submission of tax figures for annual reporting, under which the tax representative is now required to complete and submit a standardized tax form to the OeKB. The OeKB will then respond with tax figures, which the representative is required to verify. This new process is generally optional for foreign funds.
Please click here for the relevant publication on OeKB's website and the reporting file descriptions in German dated 6 June 2016. There is no English version of the file descriptions to date.
France: New Pre-Marketing Rules
On 4 July 2016, the AMF released a Statement that it has amended the definition of the act of marketing units/shares in UCITS or AIFs in France so as to introduce the concept of pre-marketing.
Under the new rules, a management company may contact up to a maximum of 50 investors (professionals or individuals whose initial subscription would be a minimum of €100,000) to assess interest prior to the launch of a UCITS or AIF. Such practice would not constitute marketing provided that the investors are not provided with a subscription form and/or documentation with definitive information on the fund's characteristics. However, any subsequent subscription by the investors would be considered marketing.
Italy: Statistical Reporting for Foreign UCITS
On 30 June 2016, the Bank of Italy ("BOI") released a Statement that Part V of Circular no 189 (Manual of Statistical and Regulatory Reporting for Collective investment Schemes) will be repealed with effect from the next reporting date for the 2016 i.e. 25 August 2016. The Circular relates to statistical reporting duties of foreign UCITS marketed in Italy. As a consequence of it being repealed, any arrangements with local paying agents for statistical reporting to the BOI are to cease and no related fees are to be charged going forward.
Please click here for a copy of the Circular in Italian. No English version is available to date.
Russia: Consultation Document on Changes to Investor Classification Rules
On 30 June 2016, the Bank of Russia released a Consultation Report on its new approach to classify financial market investors. In the Report, the Bank of Russia proposes to classify investors in terms of their level of knowledge and/or experience in the financial market and their existing savings and investments. Under the new approach, there will be three categories of investors, namely non-qualified investors, qualified investors and professional investors.
The Bank of Russia is of the view that the previous categorisation system which was restricted to qualified and non-qualified investors disregards the level of financial literacy of the population and investors capability to assume risks arising from investments in complicated financial instruments.
China: FAQ on Beneficial Ownership under new Qualified Foreign Institutional Investors Regime
On 6 May 2016, the CSRC released an FAQ on the Beneficial Ownership under the new Qualified Foreign Institutional Investors ("QFII") regime. Particularly, the FAQ clarifies that the concepts of a "beneficial owner of securities" and "nominee holder" are recognised under existing CSRC regulations. In addition, the FAQ clarifies that the legal relationship between beneficial owners of securities and QFII nominee holders should be governed by the terms of the contracts put in place between both parties.
Please click here for a copy of the FAQ.
Please also see our Q1 2016 Market Update for information on the Amended Measures for Investment in Domestic Securities by QFIIs, which came into force on 3 February 2016.
Hong Kong: Updated Product Key Facts Statement for ETFs
On 29 April 2016, the SFC released an updated Illustrative Template of the product key facts statement for exchange-traded funds. The updated Template is applicable to both domestic and overseas domiciled ETFs. In addition to illustrative examples, the Template also provides written instructions and guidance to ETFs for the preparation of key facts statements.
Please click here for a copy of the Illustrative Template.
Hong Kong: New Authorisation Periods for Fund Authorisation Process
As reported in our 2015 Q3 and Q4 Market Updates, the SFC launched a revised process for the inward marketing of foreign UCITS effective from 9 November 2015. The six month pilot period for the new process ended on 8 May 2016, and the SFC formally adopted the new process on 9 May 2016 by way of its Circular released on 22 April 2016.
The new process introduces new authorisation periods for applications where a prospective fund to be marketed is a sub-fund under an existing SFC-authorised umbrella fund and applications where an umbrella fund makes an initial application for SFC authorisation. Under the revised process, the former category is to be regarded as a "Standard Application" taking an average of one to two months to process, whereas the latter category comprises a "Non-Standard Application" taking an average of two to three months to process.
In its Circular, the SFC reported that the overall implementation of the revamped process during the pilot period has been positive. In particular, the SFC reported that the quality of new fund applications has generally improved, responses from applicants have been timelier and the overall processing time has reduced in line with the target processing timeframe.
Please click here for a copy of the SFC Circular. In addition, the SFC has released the following updated documents all dated 22 April 2016:
- New Information Checklist
- Guide on Practices and Procedures for Application for Authorisation of Unit Trusts and Mutual Funds
- FAQs on Application Procedures for Authorisation of Unit Trusts and Mutual Funds under the Revamped Process
Saudi Arabia: Amendments to Qualified Foreign Investors ("QFI") Investment Rules
On 3 May 2016, the CMA approved new Amendments which relax the rules permitting QFIs to invest in Tadawul-listed companies. Particular changes implemented include the following:
- The reduction of the minimum required value of AuM for QFIs from SAR 3.75 billion to SAR18.75 billion; and
- The removal of QFI investment limits under paragraphs (A/1), (A/2), (A/4) and (A/5) of Article 21 of the QFI Regulations. QFIs will be permitted to individually own up to 10% of Tadawul-listed companies, and resident and non-resident QFIs will be permitted to collectively own up to 49% of Tadawul-listed companies.
The Amendments are expected to come into force during the first half of 2017.
Please click here for a copy of the CMA's press release.