ESMA Q&A on AIFMD
On 24 May 2017, the European Securities and Markets Authority ("ESMA") published an updated Q&A on the application of AIFMD and its implementing measures. The Q&A contains three new questions which clarify issues relating to the following:
(a) Annex IV Reporting: how AIFMs should report information on the breakdown between retail and professional investors when this information is not available;
(b) AIF Management Passport: where an AIFM intends to manage AIFs domiciled in another EU Member State by way of the AIF management passport, the information it must provide on those AIFs in its programme of operations; and
(c) EMIR: whether an AIF can make use of the exemption for intragroup transactions under Article 4(2) of EMIR where it is subject to the clearing obligation in Article 4(1) of EMIR.
Czech Republic: Q&A on Marketing of EU AIFs
The Czech National Bank ("CNB") published a Q&A on "Marketing of investment in the Czech Republic in EU alternative investment funds" on the procedure for marketing of an EU AIF in the Czech Republic which is managed by an EU AIFM. The Q&A addresses the rules applicable to "non-public marketing" and "public marketing" of an AIF, both to "qualified investors" and "unqualified investors". While most of the information relates to marketing by authorised AIFMs, the Q&A also deals with marketing by sub-threshold AIFMs.
Ireland: AIFMD Q&A
As outlined in our Funds Quarterly Update, the Central Bank of Ireland ("CBI") published the 25th edition of its AIFMD Q&A on 15 May 2017 which contains a new question (ID 1123) on how authorised AIFMs and internally managed AIFs submit details of their designated email address to the CBI.
Luxembourg: FAQ on AIFM Law – PRIIPs Regulation
The Commission de Surveillance du Secteur Financier updated its FAQ on the Luxembourg AIFM Law in the context of Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (the "PRIIPs Regulation"). Although the FAQ mostly relates to Luxembourg AIFs, it may have relevance for Irish AIFMs who manage Luxembourg AIFs.
Norway: Notification Forms for Marketing AIFs
On 28 June 2017, the Financial Supervisory Authority of Norway published template application forms for registering an AIF under Section 6-4 of the Norwegian AIFM Act (i.e. implementing Article 36 of AIFMD) and Article 6-5 of that Act (i.e. implementing Article 42 of AIFMD). These forms are relevant for a EU AIFM wishing to register a non-EU AIF for marketing to professional investors in Norway (i.e. Article 36 of AIFMD) or a non-EU AIFM wishing to register an AIF for marketing to professional investors in Norway (i.e. Article 42 of AIFMD).
UK: Changes to Annex IV Reporting Obligations
As reported in our 1 March 2017 Client Update, the UK Financial Conduct Authority ("FCA") published amended Annex IV reporting rules on 25 January 2017, which prescribe new reporting requirements applicable to non-EEA AIFMs that have feeder AIFs marketed in the UK under Article 42 of AIFMD. The new rules apply to such non-EEA AIFMs that have quarterly reporting obligations, and came into effect on 29 June 2017.
Capital Markets Union
ESMA Response to CMU Consultation
On 6 April 2017, ESMA published its response to the Commission Consultation Document on Capital Markets Union ("CMU") Mid-Term Review 2017. ESMA's response is focused on four specific areas, namely supervisory convergence, financial data, SMEs and crowdfunding.
Notification Frameworks and Home-Host Responsibilities under UCITS and AIFMD
On 7 April 2017, ESMA published its final report, which concluded its thematic study on the notification frameworks under UCITS and AIFMD. The study focused on practical aspects of the management and marketing passports under UCITS and AIFMD, including cooperation between EEA national competent authorities ("NCAs") with the aim of enhancing supervisory convergence amongst NCAs and promoting the smooth operation of the passports. All 31 NCAs provided ESMA with feedback. Based on these responses, ESMA did not find any immediate shortcomings, but identified a number of good supervisory practices to enhancing the supervision of cross-border activities pursued by UCITS, their management companies and AIFMs. The study also exposed a number of other issues concerning the functioning of the passports which did not form part of the assessment, e.g. the potential for different interpretation of legislation, the content of notification documents and risk management of funds operating on a cross-border basis. ESMA indicated that a further analysis of these issues will follow.
European Commission on Cross-Border Distribution of Funds
On 21 June 2017, the European Commission published an Inception Impact Assessment on "Reducing barriers to cross-border distribution of investment funds", which is available here. It is designed to inform stakeholders about the Commission's work in this area, in order to facilitate effective participation by stakeholders in future consultation activities.
The Commission made reference to a range of national regulatory barriers which reduce the effectiveness of the UCITS and AIFMD marketing passports, and which are due to varying approaches by Member States in how the marketing passports may be exercised. These barriers were identified in responses to a public consultation on the cross-border distribution of investment funds, and include, among others, differing marketing requirements/practices; requirements to appoint local agents; additional disclosure requirements; as well as differing and non-transparent regulatory fees; which act as a disincentive to distributing funds more widely, ultimately leading to market fragmentation, less competition and less investor choice.
The European Commission will explore legislative and non-legislative initiatives, to address these barriers, including harmonisation of national marketing requirements and practices; prohibition of or imposition of conditions surrounding requirements to appoint local agents and introducing a principle of proportionality between the regulatory fees and the supervisory work undertaken.
ESMA Q&A on UCITS
On 24 May 2017, ESMA published an updated Q&A on the application of UCITS and its implementing measures. The Q&A features a new question on whether a UCITS can make use of the exemption for intragroup transactions under Article 4(2) of EMIR where it is subject to the clearing obligation in Article 4(1) of EMIR.
Belgium: FSMA FAQ on Approval of Advertising Material
The FSMA has updated its FAQ on the approval of advertising material. The updates relate to the use of a template for certain advertising materials relating to the public offer of UCITS or AIFs. The FAQ is available here.
Ireland: UCITS Q&A
As outlined in our Funds Quarterly Update, the CBI published the 17th edition of its UCITS Q&A on 15 May 2017, with a new question (ID 1076) on how UCITS management companies and UCITS self-managed investment companies submit details of their designated email address to the CBI.
Australia: Temporary Reinstatement of Relief for Foreign Entities with Limited Connection to Australia
The Australian Securities & Investments Commission ("ASIC") has extended the application of Class Order 03/824 in its existing form until 27 September 2018. Class Order 03/824 provides relief to foreign entities from the need to hold an Australian financial services ("AFS") licence where they only deal with wholesale clients. As reported in our Q4 2016 Market Update, this Class Order was due to expire on 1 April 2017, as ASIC were of the view that it was no longer necessary in light of the licensing exemption contained in section 911A(2E) of the Corporations Act 2001. Owing to strong support for the continuation of Class Order 03/824 from industry stakeholders in submissions on Consultation Paper 268 on Licensing relief for foreign financial services providers with a limited connection to Australia ("CP 268"), ASIC arranged for its temporary continuation through the ASIC Corporations (Foreign Financial Service Providers – Limited Connection) Instrument 2017/182. ASIC accepted that section 911A(2E) is not a complete replacement for Class Order 03/824 as its scope is limited to only certain types of financial products.
ASIC have requested further information from industry stakeholders on a number of specific points concerning Class Order 03/824 during the extension period, failing which the Class Order is likely to be repealed. The extension period is aligned with the extension period granted for certain class orders applicable to regulated foreign financial service providers ("FFSPs") from the UK, the US, Singapore, Hong Kong and Germany, as reported in our Q4 2016 Market Update. This will allow ASIC to conduct a complete review of all reliefs and exemptions available for foreign entities that provide services to wholesale clients in Australia in order to facilitate an informed decision about whether those reliefs should continue in the long term.
Hong Kong: Licensing Handbook
On 21 April 2017, the Securities and Futures Commission ("SFC") published a licensing handbook on licensing and registration matters administered by the SFC under the Securities and Futures Ordinance ("SFO"). It provides an overview of regulated activities which require a licence or registration, as well as the requirements and process for obtaining such licence or registration. As well as expanding and updating the information which was previously available from the SFC through the licensing information booklet, FAQs and circulars, the licensing handbook centralises the information in a more readily accessible form.
Hong Kong: Revamped Post-Authorisation Process
The SFC has published a Circular and FAQ concerning the pilot launch of a revamped process for post-authorisation applications (the "Revamped Process"). Under the Revamped Process, the SFC aims to enhance the processing of applications for approval of post-authorisation changes, e.g. authorisation of revised offering documents, termination or merger of funds and withdrawal of authorisation. The Revamped Process took effect on 1 August 2017 as part of a pilot period which will end on 31 January 2018. The SFC will review the Revamped Process during the pilot period and may introduce further changes.
Singapore: Guidelines on Standards of Conduct for Marketing and Distribution Activities by Financial Institutions
On 1 April 2017, the Guidelines on Standards of Conduct for Marketing and Distribution Activities came into effect in Singapore. Issued by the Monetary Authority of Singapore ("MAS"), they set out safeguards which should be adhered to by financial institutions and their representatives who conduct marketing and distribution activities that target retail customers. While the safeguards are primarily designed to address risks arising from marketing at retail outlets and in public places, the MAS also expect financial institutions to apply the guidelines to all other activities used to market their financial products and services to retail customers, e.g. holding seminars.