Regulatory Update UCITS and AIFMD Fund Forum Asia 2013, Hong Kong, 16 April 2013

Transcription

1 Regulatory Update UCITS and AIFMD Fund Forum Asia 2013, Hong Kong, 16 April 2013 Stephane Karolczuk, Head of Hong Kong Office

2 Agenda Section 1 UCITS (10 ) a) Luxembourg fund industry at a glance b) Cross-border distribution of UCITS c) Evolution of UCITS rules d) Chinese strategies under UCITS rules e) New developments in the EU and Luxembourg f) UCITS V g) UCITS VI Section 2 AIFMD (15 ) a) Introduction and timeline b) Timeline for non-eu countries c) EU AIFM and non-eu AIF d) Non-EU AIFM and EU AIF or non-eu AIF e) How do offshore jurisdictions prepare? f) Current status regarding cooperation arrangements g) The Luxembourg Model 2

3 Section 1 - UCITS

4 a) Luxembourg fund industry at a glance The big picture 3,849 investment funds 13,518 fund units EUR 2, billion of AUM in Luxembourg funds 4 Figures as at February 28, 2013 Source: CSSF

5 a) Luxembourg fund industry at a glance (continued) Net assets of Luxembourg domiciled UCIs EUR 283 billion EUR 194 billion EUR 1,991 billion SIFs / IFs UCIs UCITS 5 Figures as at February 28, 2013 Source: CSSF

6 a) Luxembourg fund industry at a glance (continued) EU AuM in UCITS and Non-UCITS (by domicile) UCITS and Non-UCITS UCITS only 17.5% 17.5% 19.1% 26.7% Luxembourg 26.7% 3.9% 31.8% 10.8% France 10.8% Germany 12.1% 13.7% 16.8% UK 13.7% 16.8% Others 14.4% 15.4% 17.7% 14.4% Luxembourg France Ireland Germany Others 6 Figures as at February 28, 2013 Source: CSSF

7 b) Cross-border distribution of UCITS Market share of Luxembourg UCITS 72% of all UCITS registered in at least 3 countries are Luxembourg funds 7 Sources: Lipper Hindsight December 31, 2011, PwC Global Fund Distribution March 2012

8 b) Cross-border distribution of UCITS (continued) UCITS beyond EU borders Sweden, 71% Germany, 67% Switzerland, 70% South Korea, 100% Japan, 61% France, 70% Bahrain, 76% Taiwan, 75% Taiwan Hong Kong, 73% Singapore, 71% Peru, 64% Chile, 73% 8 Sources: Lipper LIM and PwC analysis, 31 December 2011

9 c) Evolution of UCITS rules Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS ) Directives 2001/107/EC and 2001/108/EC of the European Parliament and of the Council of 21 January 2002 amending Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to UCITS, with regard to the investments of the UCITS and with a view to regulating management companies and simplified prospectuses, respectively Directive 2007/16/EC on eligible assets for investment by UCITS funds and the CESR Guidelines in relation thereto Directive 2009/65/EC the UCITS IV Directive 9 9

10 d) Chinese strategies under UCITS rules UCITS are widely used to market PRC and Greater China asset management capabilities to European institutional and retail investors Possibility to invest in / take exposure to a wide range of assets securities listed in Hong Kong, Singapore or securities traded on other regulated markets (such as Dim Sum bonds issued in Hong Kong), A-Shares, A- Shares financial indices, etc Possibility to invest directly in the PRC using QFII quotas, huge potential considering recent developments of the QFII regime (weekly liquidity, still 3 months lock-up) Possibility to connect a UCITS structure to R-QFII funds. Potentially, allocation of R-QFII quotas to be used by non-hong Kong based funds Possibility to distribute UCITS in the PRC through the QDII scheme 10 10

11 e) New developments in EU and in Luxembourg Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories i (known as the European Market Infrastructure t Regulation or EMIR) ESMA Guidelines on ETFs and other UCITS Issues ESMA Opinion i of Ati Article 50 par. 2 of the UCITS Directive ESMA Q&A regarding the Regulation on Short Selling and CDS Luxembourg CSSF Circular 12/546 on substance Luxembourg CSSF Regulation on anti-money laundering Luxembourg CSSF Circular on ESMA guidelines on ETFs and other UCITS Issues Luxembourg CSSF press release 12/46 on trash ratio 11 11

12 f) UCITS V In a nutshell Harmonise UCITS depositary role and duties and create a new EU-wide standard of depositary liability, should assets be lost in custody Depositary role UCITS V Remuneration Implement new rules on remuneration of risk takers and senior personnel Sanctions regime Create a new, harmonized regulatory sanctions regime for EU regulators to adhere to (minimum administrative sanctions that are to be available to supervisory authorities in case of key violation of the UCITS rules) The proposal was published on 3 July The vote in ECON Committee took place on 21 March The exact timeframe for adoption of UCITS V is not known: possibly Q2 or Q3 2013, with a further two years required for national implementation 12

13 g) UCITS VI Back to the origins of UCITS The original UCITS objectives were to remove the barriers to cross-border marketing, by allowing funds to invest in a wider range of financial instruments. The result being a single EU market, with greater investor protection, where economies of scale are passed onto consumers. UCITS VI Consultation rather than Legislative Proposal Complementary to recent EU Commission and ESMA papers Open questions to stakeholders. No EU Commission views A catch-all tidy up exercise 13 13

14 g) UCITS VI (continued) Purpose of the consultation The EU Commission i is willing to have a better understanding di in relation to Eligible assets and use of derivatives Efficient portfolio management tools Over the Counter derivatives Extraordinary liquidity management tools Depositary passport Money Market Funds Long-term investments 14 14

15 g) UCITS VI (continued) Improvements to UCITS IV Revisions to improve operations or fill perceived gaps? Self-managed investment companies Master-Feeder structures Fund mergers Notification procedures Further alignment with the AIFMD 15 15

16 Section 2 - AIFMD

17 a) Introduction and timeline Creation of a harmonized regulatory framework for managers of alternative investment funds (AIFs) AIFMD is a directive regulating managers but also indirectly regulating AIFs No Impact on UCITS funds and UCITS fund managers, to the extent they only manage or distributeib UCITS Regulates all Managers of AIFs where o o o the AIFM is based in the EU, and/or the AIF is based in the EU, and/or the AIF is marketed in the EU. Some exemptions for (i) "small" AIFM (de minimis exemptions) and (ii) some investment vehicles which do not qualify as AIF 17

18 a) Introduction and timeline (continued) Rules regarding the AIFM such as authorisation, capital, organisational and operational requirements similar than for UCITS rules applicable to management companies Certain requirements are applicable to the AIF directly such as: o o o Depositary rules; ues; Transparency, Reporting, Control, Asset Stripping; Valuation. Creation of a European passport for AIF managers (AIFMs) Unlike UCITS passport, non-eu AIFM may benefit from the European passport. 18

19 a) Introduction and timeline (continued) The decade ahead Entry into Force Implementation measures produced EU AIFMs Full AIFMD Compliance Non EU AIFM and Non Review EU AIF of co : AIFMD existing = PPM transparency regime provisions + 3 rd country specific req s Technical Standards produced Non EU AIFM and Non EU AIF: If use of Passport Full AIFMD compliance + 3 rd country specific req s EU AIFMs managing EU AIF - Access through Passport Non EU AIFM and Non EU AIF: Possible access to Passport. EU AIFM and EU AIF access through Private Placement regime subject to grandfathering Non EU AIFM and Non EU AIF access through Private Placement regime no AIFMD impact Non EU AIFM and Non EU AIF access through Private Placement AIFMD = transparency provisions Likely termination of PP regimes Non EU EU 19

20 b) Timeline for non-eu countries July Implementation into national aoalaw / Passport for EU AIFM managing EU AIF ESMA report on EU Passport EC to issue Level 2 measure to enable Passport for third country AIFM + AIF ESMA report on third country passport EC to issue Level e 2 measure for End of private placement regimes (?) 20

21 c) EU AIFM and non-eu AIF EU AIFM Managing Non-EU AIF NOT marketed in the EU Marketed in the EU AIFM licence requirement AIFMD rules on depositaries are not applicable / reporting Private placement / public offer outside of EU AIFM licence requirement Distribution (to professional investors) EU passport (from 2015) OR National private placement rules (NPPR) rules on depositaries not applicable (quid in 2018?) 21

22 d) Non-EU AIFM and EU AIF or non-eu AIF Managing EU AIF Non-EU AIF AIFM licence requirements as from 2015 Distribution in (choice of the MSR) investors) EU (to professional EU passport (from 2015) OR private Distribution (to professional investors), EU passport (from 2015) OR private placement (NPPR) until 2018 (?) placement (local rules) until 2018, rules on depositaries not applicable, however, transparency, reporting, control and asset stripping rules are applicable. 22

23 EU National Private Placement Rules private placement is (anticipated to be) less restricted private placement is (anticipated to be) not permitted or highly restricted 23

24 Non-EU AIFM non-eu AIF: Marketing in the EU Co-operation agreements based on international standards and in line with Level 2 Regulation must be in place Certain provisions of the AIFMD need to be complied with: Transparency requirements (Art annual report, Art. 23 -disclosure to investors) Reporting (Art reporting to competent authorities of EU marketing countries) Acquisition of control (Art. 26, Art. 27, Art. 28, Art. 29) Asset stripping (Art. 30) And not FATF black-listed country: Iran, Democratic People's Republic of Korea (DPRK), Bolivia, Cuba, Ecuador, Ethiopia, Indonesia, Kenya, Myanmar, Nigeria, Pakistan, São Tomé and Príncipe, Sri Lanka, Syria, Tanzania, Thailand, Turkey, Vietnam, Yemen [red=not IOSCO member] 24

25 Co-operation operation Arrangements Written agreement Information exchange procedure Right to forward information to other EU regulators and the ESMA Possibility to make on-site inspections Data transfer security/protection standards AIF subject to appropriate degree of regulatory supervision as condition for effectiveness of co-operation agreement? Current ESMA position regarding international standards: IOSCO Principles on Cross-Border Supervisory Cooperation of 2010, complements the terms and conditions of the IOSCO Multilateral MoU Concerning Consultation and Co- operation and the Exchange of Information of

26 e) How do offshore jurisdictions prepare? Offshore funds often delegate the portfolio management function and the risk management function to another jurisdiction onshore (e.g. Hong Kong, UK, Singapore, Luxembourg), there is no substance left in the offshore fund jurisdiction Appointment of e.g. a non EU AIFM such as Hong Kong manager or Singapore manager, then non-eu AIFM marketing a non-eu AIF scenario Appointment of e.g. UK AIFM or Luxembourg AIFM, then EU AIFM marketing a non-eu AIF scenario Offshore centres in negotiations with ESMA to have the cooperation arrangements and tax exchange of information agreements entered into as soon as possible Offshore centres doing internal work in order to amend the local legislation to accommodate AIFMD requirements for transparency and disclosure, reporting, acquisition of control and asset stripping 26

27 f) Current status regarding cooperation arrangements Brazil: MMoU agreed with ESMA (ESMA News of 16 January 2013) Switzerland: MMoU agreed with ESMA (ESMA Press Release of 3 December 2012) Jersey, Guernsey, Cayman, BVI, Bermuda? ESMA is currently in contact with other non-eu authorities that are members of IOSCO [almost all countries regulators are members; e.g. not: Iran, Cuba, North Korea, Yemen], and is continuing to negotiate co-operation arrangements with the relevant authorities with a view to having these in place before July (ESMA News of 16 January 2013) Each EU regulator needs to enter into MMoU (using the template MMoU approved by ESMA) with third country regulator 27

28 e) The Luxembourg Model Lux Manco Luxembourg Fund Passport available as from 2013 Delegates Portfolio Management Investors Delegation of the PM function possible however e has to be notified to the Luxembourg regulator, justified, and the Hong Kong / Singapore manager must have sufficient resources and good repute, subject to the supervision of the local regulator, the Luxembourg AIFM must perform a due diligence on the PM and supervise its activities Manager 28

29 Contact Us Stephane Karolczuk Head of Hong Kong Office stephane.karolczuk@arendt.com Website : Tel. (Hong Kong): (+852) Fax (Hong Kong): (+852) Disclaimer This presentation of Arendt & Medernach is designed to provide with summarized information and illustrations regarding the topics covered by such a presentation. This information and those illustrations are not intended to constitute legal advice and do not substitute for the consultation with legal counsel required before any actual undertakings. 29