Brexit: Preparing for a No-Deal scenario

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Milton Grant
5 years ago
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1 Brexit: Preparing for a No-Deal scenario

2 Background The 29 March deadline is fast approaching and the UK Parliament remains at an impasse on the Brexit outcome. The Brexit deal proposed by Prime Minister Theresa May was her Plan B to Parliament on 29 January. As Britain s prospects of securing a withdrawal deal continue to hang in the balance, alternative fund managers must prepare for all possible outcomes including that of a No-Deal Brexit. Options available to UK alternative fund managers in the case of a No-Deal Brexit 1. UK managers managing existing funds, for which fund raising is closed In the case of a No-Deal Brexit, UK asset managers will be able to continue to manage funds for which fund raising is closed. 2. UK managers accessing EU Investors under No-Deal Brexit using AIFMD Passport In the case of a No-Deal Brexit, UK Private Equity managers will be concerned about accessing EU investors after 29 March UK managers that use the AIFMD passport to raise funds from EU investors will have the option to : Establish an AIFM in an EU member state (e.g. Luxembourg or Ireland) Appoint a third-party AIFM (SGG Luxembourg EU AIFM) in which case the UK manager can provide investment advice to the EU AIFM the UK manager can undertake portfolio management once the conditions for delegation back to the UK are met.

3 AIFM Solutions post Brexit - Advisory Model Depositary Services DEPOSITARY ADMINISTRATION Fund (AIF) AIFM Fund Administrator SGG Third Party AIFM (Luxembourg) PORTFOLIO ADVISORY UK asset manager Portfolio Management Risk Management Valuation Service AIFM Reporting Investment Adviser INVESTMENT DECISION Investment Committee INVESTMENT PROPOSAL SGG keeps AIFM function, Risk Management and Portfolio Management Portfolio Advice is obtained from investment adviser (UK asset manager) Adviser prepares investment proposals Formal investment decision is documented, controlled and approved by SGG AIFM Advantageous in case adviser is not regulated by FCA or if jurisdiction of manager is outside the EU and there is no Cooperation Agreement between regulators

4 AIFM Solutions post Brexit - AIFM Delegated Model Depositary DEPOSITARY Fund (AIF) Fund Administrator ADMINISTRATION AIFM SGG Third Party AIFM (Luxembourg) PORTFOLIO ADVISORY UK asset manager Risk Management Valuation Service AIFM Reporting Investment Adviser SGG keeps AIFM function and Risk Management Portfolio Management is delegated to UK asset manager Focus of client on investment origination, selection and monitoring The UK manager can undertake the portfolio management once the UK FCA has the Cooperation Agreement in place with the competent authorities in each EU member state 3. UK managers accessing EU Investors under No-Deal Brexit using National Private Placement Regimes (NPPRs) On 29 March 2019, UK fund managers would have the status of a Third Country AIFM. EU members states will permit a Third Country AIFM to market AIFs in their territory under: (i) the National Private Placement Regimes ( NPPRs ) in the respective member states in which the UK AIFM wishes to market the fund and (ii) the conditions set out under Article 42 of the AIFMD.

5 The NPPRs vary considerably between jurisdictions, with some jurisdictions requiring a lengthy authorisation process, and other jurisdictions such as France, Spain and Italy being effectively off-limits. One of the conditions under Article 42 may prove to be problematic in the immediate term, namely the requirement for there to be a Cooperation Agreement in place between the regulators of the AIFM and the member state in which the AIFM seeks to market for the purposes of systemic risk oversight and in line with international standards. There is no indication of when the UK can expect the FCA to have Cooperation Agreements in place with the competent authorities of each EU member state, although reassurance has been given in the keynote address by the European Securities and Markets Authority (ESMA) Chair, Mr Steven Maijoor, at the World Federation of Exchanges Annual Meeting in Athens on 3 October EU Funds accessing UK Investors under No-Deal Brexit using FCA Temporary Permissions regime UK managers that have already chosen EU funds, including Luxembourg funds, to market to EU and UK investors may be concerned about how to access UK investors after 29 March 2019 in a No-Deal scenario. The FCA has established a temporary regime, called the Temporary Permissions Regime ( TPR ), which will allow most EEA-domiciled investment funds to continue to be marketed in the UK to new and existing investors for up to three years in the event of a No-Deal Brexit, where there is no implementation period in place so the existing passporting arrangements between the UK and the EEA cease when the UK leaves the EU on 29 March Fund managers wishing to continue to market passported funds in the UK after Brexit opened on 7 January 2019, and it will remain open until 28 March 2019.

6 How can we assist? Whatever the outcome of the UK s exit negotiations with the EU, SGG Group is determined to remain at the forefront of the market as it evolves, keeping our alternative fund manager clients informed and providing best-in-class solutions. In a constantly changing environment, you will require an international, knowledgeable, proactive and responsive team to support your needs throughout the process. As a global leader in alternative asset markets we provide a comprehensive solution for fund managers and investors across multiple jurisdictions. We can help you throughout your fund lifecycle and provide you with Depositary, Administration, Accounting, Compliance and AIFM services in key locations such as Luxembourg, The Netherlands, France, USA, Singapore, Hong Kong, Mauritius and the UK among others, with assets under administration in excess of $400 billion.

7 SGG, your partner throughout the fund lifecycle administration of a fund throughout its lifecycle. FUNDRAISING AND FORMATION INVESTMENT EXITS, DISTRIBUTION, AND WINDUP FUND LIFECYCLE DEPLOYMENT CAPITAL INVESTMENT MONITORING, REPORTING AND VALUE CREATION

For further information please contact: J.P.

com T: +44 7894 937529 Roxane Combe Business Development Director E: Roxane.

com T: +44 7881 014138 Andrew Shrimpton Chairman - Augentius Compliance Ltd

com T: +44 2073 97 5469 Worldwide contact details www.sgggroup.

com/company/sgg-s-a-/ The information contained in this document is of a

8 For further information please contact: J.P. Harrop Group Head of Sales E: T: Roxane Combe Business Development Director E: T: Andrew Shrimpton Chairman - Augentius Compliance Ltd E: Andrew.Shrimpton@augentiuscompliance.com T: Worldwide contact details SGG Group@SGG_Group_Lux The information contained in this document is of a general nature only and does not constitute a particular tax or investment opinion. of an authorized specialist. Therefore, SGG assumes no responsibility should a piece of information contained herein prove to be false, document does not imply a promise by SGG to update it in the future.

Brexit: what might change Investment Management

1 Brexit: what might change Investment Management Introduction On 23 June 2016 the UK population voted for the UK s exit from the European Union (EU). The applicable exit procedure and certain possible