Investment Fund Regulatory and Tax developments in selected jurisdictions

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Fund News Issue 106 September 2013 Investment Fund Regulatory and developments in selected jurisdictions This month developments from: UK Luxembourg Ireland Belgium Switzerland UK FCA updates its web

1 Fund News Issue 106 September 2013 Investment Fund Regulatory and developments in selected jurisdictions This month developments from: UK Luxembourg Ireland Belgium Switzerland UK FCA updates its web pages for Collective Investment Schemes In August the Financial Conduct Authority ( FCA ) launched its revised web pages for Collective Investment Schemes. The new site provides more detail in a user friendly manner and includes sections on: authorisation; recognition of overseas schemes; marketing UK UCITS in the EEA; a Key messages section; a section on the Protected Cell Regime (the submission deadline for which approaches in November 2013); and a section on the new (1 July 2013) Authorised Contractual Scheme. It can be accessed here FCA commences its thematic work on the review of fund charges In August the FCA commenced the work it set out in its Conduct Risk Outlook of March 2013 where it said it would undertake a review of fund changes. The work has started with the FCA writing For further details on any of these topics, or for any questions or queries you may have, please get in touch with your usual KPMG contact or one of the KPMG LLP (UK) contacts listed below Tom Brown Tel: Jon Mills Tel: Gareth Horner Audit Tel: Rachel Hanger Tel: Nathan Hall Tel: Paul Bradbury Manager Tel: Stefano Borsi

2 to 11 fund managers ranging from global asset managers to boutiques and the FCA foresees this phase of its review running for the remainder of Read more FCA issues final rules on fund descriptions and names On 25 July, through Handbook Notice 4 available here: the FCA has given clarity to the disclosures necessary to provide clear descriptions in fund objectives and names where terms such as absolute return or total return are used. Read more Luxembourg Regulapedia.lu: the Luxembourg fund regulation library from KPMG On 2 September 2013, KPMG Luxembourg launched a new online tool for investment management professionals. Regulapedia.lu is a web-based library that pulls together Luxembourg fund regulations. Vincent Heymans, at KPMG Luxembourg, explains the logic behind the new initiative: For any given regulation, there can be in excess of twenty relevant documents, spread across a range of different websites. You know that the information you are looking for is somewhere in cyber space but, with the plethora of institutions involved, you find yourself endlessly hunting around countless websites to locate the information you need. By bringing everything together in one place, we hope to reduce the time wasted searching for a needle in a haystack. The website has been conceived with simplicity in mind. With just one click on the name of the desired regulation, users are directed to a list of associated circulars, laws, consultation papers and other legal texts. For each regulation, the documents are grouped according to issuing institution with the most recent document at the top of the list. A powerful search function scans the content of all the documents in the library. Regulapedia is available via this link Tel: Colin French Senior Manager Tel: Richard Pettifer Director Risk and Compliance Tel: Paul Taylor Senior Manager Funds Regulatory Tel: Andrew Clark Senior Manager Accounting Tel: KPMG in Luxembourg Contact details Audit Nathalie Dogniez Tel Georges Bock Tel Advisory Vincent Heymans Tel The electronic version of Fund News contains hyperlinks to Web sites which are independent of KPMG LLP (UK) and over which KPMG LLP (UK) has no control. To the fullest extent permitted by English law, KPMG LLP (UK) will not accept any responsibility or liability for the content of any such other

3 Ireland Web sites or for any consequences. European Union (Alternative Investment Fund Managers) Regulations 2013 (S.I. 257 of 2013) published on 26 August 2013 The Minister for Finance has published the European Union (Alternative Investment Fund Managers) Regulations 2013 to give effect to the EU AIFM Directives (2011/61/EU, 2003/41/EU and 2009/65/EC) and related EU regulations ((EC) No. 1060/2009 and (EU) No. 1095/2010). (104 pages), available here Consultation on Authorisation of Regulated Firms, Funds and Intermediaries: Process Improvements and Service Standards The Central Bank of Ireland has published a Consultation Paper ( CP67 ) on the authorisation process for regulated firms, funds and intermediaries. The objective of the consultation is to improve the authorisation process with the goal of improving efficiency and timeliness of response, while maintaining rigorous assessment of new applicants. The proposed processes should improve the consistency of decision making and the quality of regulatory information provided by applicants to the Central Bank. It is expected over time to eliminate paper from the application process. Read more Consultation on Client Asset Regulations Protection of client assets is a regulatory priority for the Central Bank of Ireland. Deficiencies in firms' client asset systems and controls can have serious consequences for clients and counterparties, as well as causing reputational damage to the Irish financial market. A Central Bank review of the regulatory regime for safeguarding client assets noted that that there were inconsistencies in interpretation and application of the existing client asset requirements ("CAR") and that the requirements needed revision with issues as to form, scope and substance. The proposed Regulations and Guidance aim to enhance the Central Bank's client asset regime. Read more CBI Regulatory reporting requirements of Irish authorised investment funds - Updated: Vol July 2013 The Central Bank of Ireland s ( CBI ) regulatory reporting requirements of Irish authorised investment funds was updated and re-issued in July ( Vol July 2013 ). This guidance note is relevant for all Irish authorised investment funds ( IFs ). The purpose of the guidance note is to provide information and direction

4 to the IF s Board of Directors / Management Company / General, as appropriate, on the reporting requirements relating to the extension of the Central Bank of Ireland s Online Reporting System to IFs. The revised guidance (84 pages) is available via this link The Return of Values (Investment Undertakings) Regulations 2013 (SI 245/2013) The Return of Values (Investment Undertakings) Regulations, give effect to the provisions of section 891C of the es Consolidation Act 1997, provide for the making of annual returns to the Revenue by certain 'Investment Undertakings' of the value of the investments in a tax year, held by certain unit holders. Read more Belgium FSMA publishes Q&A on AIFMD transitional provisions and Belgian national provisions The Financial Services and Markets Authority ( FSMA ) issued a Questions and Answers ( Q&A ) document on the transitional rules that will apply to Belgian entities that are in scope of the AIFMD. Although the AIFMD has not been transposed into national law, the Belgian regulator is already accepting draft authorisation files from in-scope entities. Read more Switzerland Call for action for representatives of foreign collective investment schemes The revision of the Swiss Collective Investment Schemes Act ("CISA") made the requirements for representatives of foreign collective investment schemes more stringent and introduced the licensing requirements for representatives of foreign collective investment schemes dealing with qualified investors ('representatives light'). All representatives of foreign collective investment schemes must: critically analyse their operational organisation; prepare new representative and distribution

5 agreements; and, where appropriate, apply for a license. Read more Publications Evolving Investment Management Regulation June 2013 here UK FCA updates its web pages for Collective Investment Schemes In August the Financial Conduct Authority ( FCA ) launched its revised web pages for Collective Investment Schemes. The new site provides more detail in a user friendly manner and includes sections on: authorisation; recognition of overseas schemes; marketing UK UCITS in the EEA; a Key messages section; a section on the Protected Cell Regime (the submission deadline for which approaches in November 2013); and a section on the new (1 July 2013) Authorised Contractual Scheme. It can be accessed here FCA commences its thematic work on the review of fund charges In August the FCA commenced the work it set out in its Conduct Risk Outlook of March 2013 where it said it would undertake a review of fund changes. The work has started with the FCA writing to 11 fund managers ranging from global asset managers to boutiques and the FCA foresees this phase of its review running for the remainder of The review is focused on the complexity of charges and whether these are understood by consumers, particularly other charges that do not form part of annual management fees. The review by the FCA is supported by the Investment Management Association which

6 recognises the need for transparency of costs and charges as a core requirement to the delivery of authorised funds to retail investors. This is reflected in the IMA taking the initiative and proposing to enhance the presentation of the share class performance and all charges on a per unit basis in the annual report. FCA issues final rules on fund descriptions and names On 25 July, through Handbook Notice 4 available here: the FCA has given clarity to the disclosures necessary to provide clear descriptions in fund objectives and names where terms such as absolute return or total return are used. The FCA originally consulted in Chapter 8 of CP 12/27. The now made rules require that where a fund indicates in its objectives or literature, through descriptions such as absolute return or total return, that the intent is to deliver positive returns in all markets, but without a guarantee of these returns, then additional statements in the objectives and literature are required for investors to explain: that capital is at risk; the period over which the fund aims to deliver the positive return; and that there is no guarantee of the positive return over that or any other time period. There are other minor amendments made in relation to the identification of Property Authorised Investment Funds ( PAIFs ) etc in this short set of COLL rule amendments. The document is FCA 2013/57 (eight pages). Back to top Luxembourg Regulapedia.lu: the Luxembourg fund regulation library from KPMG On 2 September 2013, KPMG Luxembourg launched a new online tool for investment management professionals. Regulapedia.lu is a web-based library that pulls together Luxembourg fund regulations. Vincent Heymans, at KPMG Luxembourg, explains the logic behind the new initiative: For any given regulation, there can be in excess of twenty relevant documents, spread across a range of different websites. You know that the information you are looking for is somewhere in cyber space but, with the plethora of institutions involved, you find yourself endlessly hunting around countless websites to locate the information you need. By bringing everything together in one place, we hope to reduce the time wasted searching for a needle in a haystack. The website has been conceived with simplicity in mind. With just one click on the name of the desired regulation, users are directed to a list of associated circulars, laws, consultation papers and other legal texts. For each regulation, the documents are grouped according to issuing institution with the most recent document at the top of the list. A powerful search function scans the content of all the documents in the library. Regulapedia is available via this link.

7 Back to top Ireland European Union (Alternative Investment Fund Managers) Regulations 2013 (S.I. 257 of 2013) published on 26 August 2013 The Minister for Finance has published the European Union (Alternative Investment Fund Managers) Regulations 2013 to give effect to the EU AIFM Directives (2011/61/EU, 2003/41/EU and 2009/65/EC) and related EU regulations ((EC) No. 1060/2009 and (EU) No. 1095/2010). (104 pages), available here. Consultation on Authorisation of Regulated Firms, Funds and Intermediaries: Process Improvements and Service Standards The Central Bank of Ireland has published a Consultation Paper ( CP67 ) on the authorisation process for regulated firms, funds and intermediaries. The objective of the consultation is to improve the authorisation process with the goal of improving efficiency and timeliness of response, while maintaining rigorous assessment of new applicants. The proposed processes should improve the consistency of decision making and the quality of regulatory information provided by applicants to the Central Bank. It is expected over time to eliminate paper from the application process. The new process for investment firms will adopt a two-tier risk-based approach with revised application forms. It is anticipated that all small and non-complex firm applications will be reviewed within two weeks of submission to determine their completeness. These applications will be reviewed at a high-level with focus on areas such as shareholders, directors, staffing, financial projections, including regulatory capital and client assets. Applications from larger firms with complex strategies will be managed with more involvement from senior supervisors. The Central Bank will require a preliminary meeting to discuss a key facts document which will be submitted by the applicant prior to the meeting. Applications will be reviewed within two weeks to determine their completeness. Once deemed complete a detailed review and analysis of the applicant's business model, financial projections and CAAP will be undertaken. Submissions are invited from interested parties until 28 October CP67 (37 pages) is available here. Consultation on Client Asset Regulations Protection of client assets is a regulatory priority for the Central Bank of Ireland. Deficiencies in firms client asset systems and controls can have serious consequences for clients and counterparties, as well as causing reputational damage to the Irish financial market. A Central Bank review of the regulatory regime for safeguarding client assets noted that that there were inconsistencies in interpretation and application of the existing client asset requirements ( CAR ) and that the requirements needed revision with issues as to form, scope and substance. The

8 proposed Regulations and Guidance aim to enhance the Central Bank s client asset regime. The main changes proposed in Consultation Paper 71 ( CP71 ) to the revised client asset regime include: The Regulations are based on seven Client Asset Core Principles which reflect the fundamental obligations on all firms holding client assets. Fund Service Providers, as defined in the Regulations, will, for the first time, be subject to Client Asset Regulations in respect of client funds held in Collection Accounts. The daily calculation will be expanded to include margin transactions for investment firms writing margin transactions. The Regulations do not permit a firm to maintain any asset other than client assets in a client asset account/collection Account, e.g. firm s own funds in the form of a Buffer. Firms will be required to appoint an individual to a Client Asset Oversight Role which will be a pre-approved controlled function, appointed under Part 3 of the Central Bank Reform Act Firms will be required to: create; document; and maintain a client asset management plan in order to safeguard client assets. The closing date for submissions is 31 October CP71 (33 pages) is available via this link. CBI Regulatory reporting requirements of Irish authorised investment funds - Updated: Vol July 2013 The Central Bank of Ireland s ( CBI ) regulatory reporting requirements of Irish authorised investment funds was updated and re-issued in July ( Vol July 2013 ). This guidance note is relevant for all Irish authorised investment funds ( IFs ). The purpose of the guidance note is to provide information and direction to the IF s Board of Directors / Management Company / General, as appropriate, on the reporting requirements relating to the extension of the Central Bank of Ireland s Online Reporting System to IFs. The revised guidance (84 pages) is available via this link. The Return of Values (Investment Undertakings) Regulations 2013 (SI 245/2013) The Return of Values (Investment Undertakings) Regulations, give effect to the provisions of section 891C of the es Consolidation Act 1997, provide for the making of annual returns to the Revenue by certain Investment Undertakings of the value of the investments in a tax year, held by certain unit holders. The schedule for submission of the returns is as follows: Year Due Date September onwards 31 March in the following year

9 SI 245/2013 (11 pages) is available via this link. Belgium FSMA publishes Q&A on AIFMD transitional provisions and Belgian national provisions The Financial Services and Markets Authority ( FSMA ) issued a Questions and Answers ( Q&A ) document on the transitional rules that will apply to Belgian entities that are in scope of the AIFMD. Although the AIFMD has not been transposed into national law, the Belgian regulator is already accepting draft authorisation files from in-scope entities. The Q&A deals with the following topics: Authorisation deadline for existing and new AIFMs; Distribution of newly created AIFs; Availability of specific treatment for fixed-term sub-funds of an open-ended AIF; Interpretations of Articles 61 3 and 61 4 of the AIFMD (transitional provisions); Deadline for adherence to Articles 36 and 42 of the AIFMD (third-country rules); Marketing of units by an AIFM located in a country that has transposed the AIFMD; Management of Belgian AIFs by an AIFM located in a country that has transposed the AIFMD; Management by a Belgian AIFM of AIFs located in other Member States; and Content of authorisation file. The Q&A is available via the following web link Back to top Switzerland Call for action for representatives of foreign collective investment schemes The revision of the Swiss Collective Investment Schemes Act ( CISA ) made the requirements for representatives of foreign collective investment schemes more stringent and introduced the licensing requirements for representatives of foreign collective investment schemes dealing with qualified investors ( representatives light ). All representatives of foreign collective investment schemes must: critically analyse their operational organisation; prepare new representative and distribution agreements; and, where appropriate, apply for a license. The revised CISA contains new challenges for representatives. It is important to start planning and implementing the measures necessary for complying with the new statutory provisions now in order to be ready within the designated transitional periods. Representatives will have to deal with a very long to-do list.

10 1) Call to action for the institution For representatives light having been active prior 1 March 2013, there is a notification obligation by 31 August 2013 and a transitional period until 28 February 2015 (art. 158d para. 1 and 2 CISA). There is a transitional period for applying for a license and complying with statutory provisions. This means that representatives light must apply for their license by 28 February 2015 and adjust their articles of association, organisational rules, internal directives as well as their representation and distribution agreements by 28 February For representatives such as banks, securities dealers, insurance companies and asset managers of collective investment schemes having been active prior 1 March 2013, there is a transitional period until 28 February 2014 (art. 144c para. 1 CISO). This means that representatives such as banks, securities dealers, insurance companies and asset managers of collective investment schemes must apply for a license by 28 February 2014 and adjust their articles of association, organisational rules, internal directives as well as their representation and distribution agreements by 28 February Representatives that already have a license as a representative or remain exempt from the licensing requirement (fund management companies) must adjust their operational organisation (risk management, internal control system and compliance) and have until 28 February 2014 to reflect the new regulations (art. 144c para. 3 CISO). This also means that the articles of association, the organisational rules and internal directives must be adapted to the new provisions by 28 February For concluding new agreements for the distribution to qualified investors there is a transitional period until 28 February 2015 (art.144c para. 5, art. 30a, art. 131a CISO). There are no transitional periods for distribution and representation agreements for the distribution to non-qualified investors, which means that these contracts must be adapted immediately. All representatives who became active for foreign collective investment schemes after 1 March 2013 must comply with statutory provisions immediately. 2) Call to action for products For adjusting the relevant documents for foreign collective investment schemes that have already been admitted for distribution to retail investors in Switzerland before 1 March 2013, there is a transitional period until 28 February 2014 (art. 158d para. 5 CISA). The relevant documents of foreign collective investment schemes that are distributed to qualified investors must also be adjusted by 28 February 2015 (art. 158d para. 4 CISA). All representatives would be well advised to review their websites immediately. Further information is available via the following link. Back to top Unsubscribe Privacy Legal 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. KPMG LLP, 15 Canada Square, London, E14 5GL Designed and produced by RR Donnelley. Publication Number: RRD

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