Marketing Private Funds and Discretionary Account Services

Transcription

1 Marketing Private Funds and Discretionary Account Services Asia and Beyond Seventh Edition, October 2015

2 Marketing Private Funds and Discretionary Account Services Asia and Beyond Seventh edition October 2015 General editor: Scott Carnachan, Deacons Whilst every effort has been made to ensure the accuracy of this publication, it is for general guidance only and should not be treated as a substitute for specific advice Deacons

3 Marketing Private Funds and Discretionary Account Services Asia and Beyond Seventh edition October 2015 This book is designed to assist asset managers in their capital-raising and marketing activities. It uses a standard questionnaire that Deacons developed to provide practical guidance on marketing and the other activities that asset managers can conduct in each location. The book includes answers for various jurisdictions in Asia, as well as Australia, Luxembourg, Switzerland, the United Kingdom and the United States. Deacons worked with specialist law firms in each jurisdiction to answer the questionnaire. We trust you will find it useful. About Deacons Deacons is the oldest and largest independent law firm in Hong Kong. We provide an extensive range of legal and commercial services to local and international corporations. With over 160 years of experience in providing legal services, our clients are assured of the integrity and stability of one of the region s oldest and most respected law firms. Financial Services at Deacons Deacons Financial Services Group is a dedicated team of funds and regulatory lawyers with substantial experience in funds, regulatory, licensing, compliance and securities matters. Deacons is credited as being the market leader in Hong Kong in terms of depth of client base and range of funds we have established. Individuals in the team offer a diverse range of international and local experience and are capable of conducting transactions in English, Cantonese, Mandarin, Japanese and Malay. Deacons has a long and prestigious history in the hedge funds sector and a reputation for assisting clients to bring innovative products to investors. We have advised on a multitude of hedge fund start-ups throughout Asia. Deacons acts for more than 100 managers and some of Asia's largest hedge funds, and has close relationships with prime brokers and hedge fund administrators. Deacons regularly assists managers to set up private equity and venture capital funds. Deacons can leverage its considerable experience to assist private equity groups by pulling together the specialisations of the firm in investment funds, mergers and acquisitions, corporate finance and human resources and pensions. Deacons regulatory lawyers can assist managers with all their regulatory needs, including advice on disclosure of interests, insider dealing and market misconduct, data privacy and protection, competition, bribery and corruption laws. For further information about Deacons and our services, please visit our website

4 Asia Contents Hong Kong... 1 India Indonesia Japan Malaysia PRC Philippines Singapore Taiwan Thailand Beyond Asia Australia England, Scotland and Wales Luxembourg Switzerland United States of America...223

5 Hong Kong Questionnaire for Hong Kong (the Jurisdiction ) Law Firm: Deacons Website: Lawyer: Scott Carnachan, Consultant Telephone: Date: 31 October scott.carnachan@deacons.com.hk In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 1

6 Hong Kong Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Yes, so long as in attending the seminar, conference or other industry event the Manager does not hold itself out as carrying on a business in a regulated activity. The Hong Kong Securities and Futures Ordinance (SFO) defines a number of activities as regulated activities. Marketing the Fund to prospective investors falls within the definition of dealing in securities (type 1 regulated activity). Providing investment advice on the purchase or sale of securities (including interests in the Fund) falls within the definition of advising on securities (type 4 regulated activity). Providing investment management services falls within the definition of asset management (type 9 regulated activity). (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. Yes, so long as in speaking at the seminar, conference or other industry event the Manager does not hold itself out as carrying on a business in a regulated activity. The Manager can give educational seminars, give a general market outlook and give commentary on general economic and other issues, such as regulatory or operational issues. The Manager should not say anything that could be construed as marketing the Fund or the Manager s investment management services. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? Yes, so long as by sponsoring the seminar, conference or other industry event the Manager is not seen to be holding itself out as carrying on a business in a regulated activity. Sponsorship of a seminar, conference or other relevant industry event carries a greater risk that it will be viewed as marketing of the Manager s services to the public, which is a prohibited activity. An assessment would need to be made on a case by case basis, taking into account factors such as (i) the subject matter of the event, (ii) the target audience for the event, (iii) the description of the Manager in the materials for the event, (iv) the involvement of the Manager in promoting the event, and (v) other materials describing the Manager that will be made available to participants at the event e.g. client brochures etc. 2

7 Hong Kong The same principles apply whether the Manager is the primary sponsor or only one of a number of sponsors. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Whilst in Hong Kong, the Manager can give to people the Manager meets at seminars, conferences and other relevant industry events: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only. Business cards and other information provided should not contain Hong Kong contact details. There is a risk the Manager will be viewed as holding itself out as carrying on a business in a regulated activity if it gives the website address of the Manager to people the Manager meets at seminars, conferences and other relevant industry events whilst in Hong Kong. The Manager can reduce this risk by only giving its website address to (a) representatives of institutional investors such as banks, insurance companies, stock brokers, investment managers and licensed financial advisers, and (b) a small number of other persons. Whilst in Hong Kong, the Manager should only give other information about the Manager and its services and products in response to an unsolicited request for the information; for example, where the relevant person has contacted the Manager as a result of information obtained from a website, magazine or other publication that is not targeted at Hong Kong. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Summary of the law Section 115 of the SFO will deem the Manager to be holding itself out as carrying on a business in a regulated activity if: (i) the Manager actively markets to the public any service the Manager provides outside Hong Kong; and 3

8 Hong Kong (ii) such service would constitute a regulated activity if provided in Hong Kong. In determining whether a person actively markets its services, the Hong Kong Securities and Futures Commission (SFC) will consider the nature of the business activities as a whole and the nature of the marketing. The SFO defines the public as the public of Hong Kong, and includes any class of that public. If the only people in Hong Kong that the Manager markets to are professional investors then there is a reasonable argument that the Manager is not marketing to the public (although there is no formal authority for this view). It would also be prudent to limit the number of "professional investors" to whom the Manager markets. Professional investors include institutional investors such as banks, insurance companies, stock brokers, investment managers and licensed financial advisers, but does not necessarily include insurance intermediaries. Practical application The Manager can send from outside Hong Kong to people the Manager meets at seminars, conferences and other relevant industry events: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only. Business cards and other information provided should not contain Hong Kong contact details. There is a risk the Manager will be viewed as actively marketing its services to the public in Hong Kong if it sends from outside Hong Kong the website address of the Manager to people the Manager meets at seminars, conferences and other relevant industry events. The Manager can reduce this risk by only giving its website address to (a) representatives of institutional investors such as banks, insurance companies, stock brokers, investment managers and licensed financial advisers, and (b) a small number of other persons. There is a risk the Manager will be viewed as actively marketing its services to the public in Hong Kong if it sends from outside Hong Kong other information about the Manager and its services and products to people the Manager meets at seminars, conferences and other relevant industry events. The Manager can reduce this risk by only sending information to (a) representatives of institutional investors such as banks, insurance companies, stock brokers, investment managers and licensed financial advisers, and (b) a small number of other persons. Please see our responses to Part III for further information in relation to sending information about the Fund to persons in Hong Kong. The Manager can also send from outside Hong Kong other information about the Manager and its services and products in response to an unsolicited request for the information; for example, where the relevant person has contacted the Manager as a result of information obtained from a website, magazine or other publication that is not targeted at Hong Kong. 4

9 Hong Kong (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Yes, so long as (i) the Manager is not seen to be holding itself out as carrying on a business in a regulated activity in Hong Kong e.g. by statements in the invitation, and (ii) the invitation does not breach the Prevention of Bribery Ordinance. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Yes, so long as (i) the Manager is not seen to be holding itself out as carrying on a business in a regulated activity in Hong Kong e.g. by statements in the invitation, and (ii) the invitation does not breach the Prevention of Bribery Ordinance. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Section 174 of the SFO prohibits cold calling, subject to certain exemptions described below. Prohibition on unsolicited calls Section 174 states that a licensee (otherwise known as an intermediary ) or its representatives may not make an offer to a person to enter into an agreement to provide financial products or services, nor induce or attempt to induce a person to enter into such an agreement, during or as a consequence of an unsolicited call. Definitions of call, unsolicited call and permissible communication Call means a visit in person or a communication made by any means. "Unsolicited call" means a call made otherwise than at the express invitation of the person called upon. A call does not include a "permissible communication", which is a communication that is not a visit in person, a telephone conversation or any other interactive dialogue where immediate exchange of statements can be made. As a result, communications by fax, postal mail and are permissible. Communications by may be subject to the Unsolicited Electronic Messages Ordinance. Exemptions from prohibition on cold calling The prohibition in section 174 does not apply to calls on licensed persons (such as stock brokers, investment managers and financial advisers), professional investors, money lenders, solicitors or professional accountants 5

10 Hong Kong 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? In addition to the activities noted in our answer to Question 1(d), the Manager may conduct activities that are generic in nature such as providing its comments on the general outlook and developments of the industry or general investment strategies and trends. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? In addition to the activities noted in our answer to Question 1(e), the Manager may conduct activities that are generic in nature such as providing its comments on the general outlook and developments of the industry or general investment strategies and trends. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? For the Manager: The Hong Kong tax regime is territorial. The Manager will be subject to Hong Kong profits tax if and only if it: (i) carries on a trade, business or profession in Hong Kong, either in its own capacity or through dependent or independent agents; and (ii) derives Hong Kong source profits from such trade, business or profession. For employees of the Manager: In order to avoid a charge to Hong Kong salaries tax on income from employment, a maximum of 60 days in any one year of assessment (the period from 1 April to 31 March in the following year). Broadly speaking, an employee will not be charged to Hong Kong salaries tax if: (i) the employee is not a Hong Kong Permanent Resident (i.e., the employee in question is only a visitor to Hong Kong during that employee s stays in Hong Kong); and (ii) the aggregate number of days the employee spends in Hong Kong in the relevant year of assessment does not exceed 60 days. In practice, this period includes any day on which the employee is in HK for whatever reason (including non-business trips). 6

11 Hong Kong Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Yes. Subject to any restrictions in their constitutive documents, Hong Kong investors can appoint an offshore investment manager to manage a segregated mandate. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Yes. See our responses to Question 1(e) of Part I. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. Responding to an unsolicited request by a prospective investor does not constitute active marketing by the Manager of its services to the public. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes. A request for proposal is an unsolicited request by a prospective investor and so does not constitute active marketing by the Manager of its services to the public. The answer is the same whether the request for proposal is private or public. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Yes. Responding to an unsolicited request by a prospective investor to meet with that prospective investor does not constitute active marketing by the Manager of its services to the public. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? 7

12 Hong Kong Yes. Attending a beauty parade or finals presentation is equivalent to the situation described in Question If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? No. 8

13 Hong Kong Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Yes. Subject to any restrictions in their constitutive documents, Hong Kong investors can invest in the Fund. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. Offering of the Fund to the public in Hong Kong requires prior SFC authorisation. There are a limited number of situations in which an information memorandum or other document which contains an invitation to subscribe for interests in the Fund can be made available to potential investors in Hong Kong without needing to comply with the prospectus requirements of the Hong Kong Companies (Winding Up and Miscellaneous Provisions) Ordinance (CO) or be authorised by the SFC before issue. The first situation is known as the professional investors exception. The second situation is known as the private placement exception. Professional investors exception Professional investors, as defined in the SFO, include (i) institutional investors such as banks, insurance companies, stock brokers, investment managers and licensed financial advisers (but does not necessarily include insurance intermediaries), and (ii) high net worth investors (HNW investors), being trust corporations with at least HK$40 million in assets and individuals, corporations and partnerships with investment portfolios of at least HK$8 million. It is necessary to document that a HNW investor satisfies the asset test / portfolio threshold and so qualifies as a professional investor. Documentary proof can include custodian statements, audited financial statements (or in the case of individuals, financial statements verified by an accountant) or such other evidence as intermediaries consider sufficient. Private placement exception Private placement arises where information is distributed in such a manner that it does not constitute an offer to the public and therefore does not fall within the prohibition contained in the SFO or the definition of "prospectus" in the CO. Schedule 17 to the CO sets out some situations where a document 9

14 Hong Kong used in a private offer by the Fund will not constitute a prospectus, including: (a) an offer to not more than 50 persons (the limited offerees exception); (b) an offer in respect of which the total consideration does not exceed HK$5 million or its equivalent in another currency (the small offer exception); and (c) an offer in respect of which the minimum subscription per investor is not less than HK$500,000 or its equivalent in another currency (the minimum subscription exception). It is possible to combine an offer under the professional investors exception with an offer under the limited offerees exception (that is, to offer the Fund to an unlimited number of professional investors as well as to no more than 50 non-professional investors). However, if the minimum subscription exception is relied on, all Hong Kong investors must invest at least HK$500,000 or its equivalent in another currency, regardless of whether they are professional investors. In each case, the offer document must include a prescribed warning statement in the following form or a form to the like effect: W A R N I N G The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document you should obtain independent professional advice. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? N/A 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Yes. The Manager must not do anything that could be construed as offering the Fund to the public in Hong Kong. Accordingly, the Manager must ensure that any marketing activities it undertakes outside Hong Kong in relation to prospective investors in Hong Kong comply with either the professional investors exception or the private placement exception described in our response to Question 2 above. In addition, the Manager must comply with the restrictions on cold calling, as described in our response to Question 2 of Part I above. 10

15 Hong Kong 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? No. Marketing the Fund to prospective investors whilst in Hong Kong falls within the definition of dealing in securities (type 1 regulated activity) and can only be done by persons who are licensed by or registered with the SFC for type 1 regulated activity. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? Yes. The local agent must be licensed by or registered with the SFC for dealing in securities (type 1 regulated activity). 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? Yes, representatives of the Fund or the Manager may accompany the local agent to meet with prospective investors in Hong Kong. The representatives can provide general information on the Manager, including its history, structure, investment approach and philosophy, and the Manager s outlook for the markets. The representatives can also provide information on the background and experience of the portfolio manager(s) who will be responsible for managing the Fund. The representatives cannot make any recommendations about the Fund, provide information on how to invest in the Fund, negotiate fee rebates or give the Fund s offering documents to prospective investors. Instead, the local agent should be responsible for these activities. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, so long as in doing so the Manager complies with either the professional investors exception or the private placement exception described in our response to Question 2 above. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes, so long as in doing so the Manager complies with either the professional investors exception or the private placement exception described in our response to Question 2 above. 11

16 Hong Kong 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, so long as in doing so the Manager complies with either the professional investors exception or the private placement exception described in our response to Question 2 above. The answer is the same whether the request for proposal is private or public. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Yes, if accompanied by a licensed local agent, but the information a representative can provide to the prospective investor whilst in Hong Kong is limited as described in our response to Question 7 above. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Yes, if accompanied by a licensed local agent, but the information a representative can provide to the prospective investor whilst in Hong Kong is limited as described in our response to Question 7 above. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? No. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. 12

17 Hong Kong (b) the Fund was structured as a unit trust rather than as a company? If the Fund is structured as a limited partnership, a limited liability partnership, a unit trust, or a contractual joint venture rather than as a company, additional steps must be taken to ensure that an offer intended as a private offer is not treated as an offer to the public in Hong Kong. An offer to an unlimited number of professional investors, plus not more than 50 offerees (not actual subscribers) who do not qualify as professionals, will not be treated as an offer to the public in Hong Kong. Further, the following are normally understood to be the requirements for a private placement of securities issued by a non-corporate fund: (a) Each information memorandum to be issued should be numbered in series and contain on the cover the prescribed warning statement referred to in our response to Question 2 of Part III above. (b) Each information memorandum issued should be individually addressed to each offeree, the subscriptions for interests in the Fund should only be accepted from that offeree and the offeree should be requested not to pass on the information memorandum to any other person. (c) The offeree should only be able to purchase interests in the Fund as principal or on behalf of clients pursuant to a discretionary mandate. (d) The minimum subscription per investor should be stated and should be a sizeable amount. (e) The transfer of the interests in the Fund by the offeree to any person in Hong Kong should preferably be restricted for a minimum period of 6 months following allotment. (f) There should be no public advertising at all in Hong Kong in relation to the information memorandum. The issue of promotional material relating to the acquisition of interests in the Fund should be strictly limited to offerees. (c) the Fund was structured as a limited partnership rather than as a company? See our response to Question 14(b). (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No. 13

18 Hong Kong Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? No, so long as the Manager does not include marketing materials for other investment products in the information. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes, so long as the Manager does not market other investment products during the meeting. 14

19 Hong Kong Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The Securities and Futures Commission is the primary regulator responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The Securities and Futures Ordinance is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction. 15

20 India Questionnaire for India (the Jurisdiction ) Law Firm: Cyril Amarchand Mangaldas Lawyer: Ipsita Dutta Telephone: / Date: 31 October ipsita.dutta@cyrilshroff.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is just for general guidance and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to any of the contacts listed. NOTE: Do note that in terms of the SEBI (Investment Advisers) Regulations, 2013 ( IA Regulations ) investment advisors, providing investment advice are required to obtain registration with SEBI. Whilst currently, the IA Regulations clearly apply to entities who provide investment advice in relation to Indian securities, there exists some degree of ambiguity in relation to the applicability of the IA Regulations to entities which are based offshore and engaged in providing advisory services to Indian clients on investments in foreign (non-indian) securities. This is primarily due to the fact that the definition of investment advice under the Investment Advisers Regulations includes advice in relation to investment products. Given that there is no regulatory clarity on what would constitute an investment product, it is not clear if this term would include foreign securities or products as well. Having said that, a reading of the Investment Advisers Regulations seems to indicate that foreign advisers, advising Indian clients on foreign securities, are not intended to be covered under the aegis of the Investment Adviser Regulations, since a number of the prescribed compliance requirements under the Investment Advisers Regulations would be impracticable for such foreign advisers to comply with. The ambiguity surrounding the application of the IA Regulations to foreign advisers is an issue which has been raised by various stakeholders in their discussions with the regulator but currently, there does not exist any regulatory clarity on this issue. 16

21 India In view of the above, it would be advisable for a Manager to ensure that it undertakes its activities in relation to any product specific information purely on a reverse inquiry basis, so as to be able to demonstrate that it has not actively solicited or conducted business in India. NOTE: Additionally, please also note that the legal regime governing corporates in India has undergone a change as the Companies Act, 1956 has been replaced by the Companies Act, 2013 ( Companies Act ). The new act, in Section 42, prescribes the manner in which companies may offer securities on a private placement basis and stipulates that in case of a private placement, the offer of securities or invitation to subscribe securities should be made to such number of persons not exceeding fifty or such higher number as may be prescribed. The Companies (Prospectus and Allotment of Securities) Rules, 2014 ( Companies Rules ) issued under Section 42, further clarify, that a company should not make an offer or invitation for private placement of securities to more than 200 persons in the aggregate in a financial year, excluding qualified institutional buyers, employees of the company who are offered securities under a scheme of employee stock option and also provide for various other terms and conditions in relation to private placement of securities in India including a prohibition on marketing such privately placed securities to the general public. For instance, Section 42 read with the Companies Rules inter alia require that the marketing and offering materials should be distributed privately to pre-selected prospective investors and should not be made available to the public generally, and each offer should be made to a specified addressee, with no right of renunciation in favour of other persons, and may only be accepted by such addressee. Accordingly, it is advisable for the entity conducting the offering to have a database of the persons to whom the offer is to be made and the offering document should clearly state that they are private and confidential and for private circulation only and that they may not be further circulated or distributed by the addressee and such documents should not be drafted in any way which may give rise to the impression that it is intended to be circulated to the public. Whilst this Section 42 and the Companies Rules primarily deal with marketing of privately placed Indian securities and does not specifically govern the manner in which foreign securities may be marketed to Indian residents, the abovementioned requirements should be complied with as best practices to ensure that the distribution of marketing and offering materials relating to the Fund does not constitute an offer or invitation to the public within the meaning of the Companies Act. Also refer to our response to Question 2 in Part III below. 17

22 India Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. The Manager would be permitted to attend seminars, conferences, other relevant industry events in India, so long as only generic non-product specific information is discussed and the Manager does not solicit business or offer financial products or services to clients in India. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. The Manager would be permitted to speak at seminars, conferences and other relevant industry events in India, so long as only generic non-product specific information is discussed and the Manager does not provide any specific information on specific products and does not solicit business or offer financial products or services to clients in India. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? There is no restriction on the Manager sponsoring a seminar or conference in India subject to the condition that only non-product specific, generic information is discussed at such seminar and the Manager does not solicit business or offer financial products or services to clients in India at such seminar. There would be no difference if the Manager were to be the primary sponsor or one of a number of sponsors. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. The Manager may provide information set out in (ii) (iii) and (iv) above. However, providing (i) and (v) may be considered solicitation of business in India and should only be provided upon receipt of a request from the client, on a reverse inquiry basis. 18

23 India (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Yes, such information can be provided, but preferably on a reverse inquiry basis. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. There are no restrictions on the Manager inviting prospective clients to attend lunches, dinners, sporting events, etc. as long as the Manager does not solicit business or offer financial products or services to clients in India and does not provide any specific information on specific products to clients in India. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. There are no restrictions on the Manager inviting prospective clients to attend lunches, dinners, sporting events, etc. as long as the Manager does not solicit business or offer financial products or services to such clients. The Manager may respond to queries on specific products or services only on a reverse inquiry basis. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Yes, cold calling would lead to solicitation of business and hence is not advisable. Also, where the Manager is a banking entity, please note that all banks, both Indian and foreign, including those not having an operational presence in India, are mandated to seek prior approval from the RBI for schemes being marketed by them in India to Indian residents either for soliciting foreign currency deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company ( Bank Approval Requirement ). This would also cover cold calling. 19

24 India 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? The Manager may provide general non-product specific information to prospective clients in India. The principal restriction to bear in mind here is that any discussion on specific products must be on a reverse enquiry basis and the Manager may provide product specific information from an offshore location, only when the potential client resident in India has directed a request for product specific information. In the event that the Manager receives unsolicited enquiries on specific products from clients in India, he may ask such potential clients to contact him when he returns to his offshore location. Also, do note that the Bank Approval Requirement would be applicable in all cases where the Manager is a banking entity. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? The Manager may only provide general non-product specific information to prospective clients while undertaking marketing activities from an offshore location. The principal restriction to bear in mind here is that any discussion on specific products must be on a reverse enquiry basis and the Manager may provide product specific information from an offshore location, only when the potential client resident in India has directed a request for product specific information. Also, do note that the Bank Approval Requirement would be applicable in all cases where the Manager is a banking entity. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? There are no restrictions on how frequently the representatives of the Manager may visit India. However, do note that a person is considered to be resident in India, if he stays in India for a period of 182 days or more in a relevant financial year (April 1 to March 31). A person will also be considered to be a resident if he is in India for 60 or more days in a relevant financial year and has been in India for 365 days or more during four years immediately preceding the relevant financial year. Therefore, in the event that the representatives of the Manager stay in India for periods in excess as indicated above, they would be considered a resident and accordingly be liable to pay income tax in India. 20

25 India Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. As indicated above, the IA Regulations seek to govern and regulate the provision of investment advisory services to Indian investors. In terms of the IA Regulations, entities (including foreign entities incorporated outside India) providing investment advice are required to obtain registration with SEBI, as an investment advisor. Whilst the IA Regulations clearly apply to entities who provide investment advice in relation to Indian securities, there exists some degree of ambiguity in relation to the applicability of the IA Regulations to entities which are based offshore and engaged in providing advisory services to Indian clients on investments in foreign (non-indian) securities. Having said that, a reading of the IA Regulations seems to indicate that foreign advisers, advising Indian clients on foreign securities, are not intended to be covered under the aegis of the IA Regulations, since a number of the prescribed compliance requirements under the IA Regulations would be impracticable for such foreign advisers to comply with. The ambiguity surrounding the application of the IA Regulations to foreign advisers is an issue which has been raised by various stakeholders in their discussions with the regulator but currently, there does not exist any regulatory clarity on this issue. In view of the above, it would be advisable to ensure that all activities in relation to any product specific information are undertaken purely on a reverse inquiry basis, so as to be able to demonstrate that business has not been actively solicited or conducted in India. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? The Manager may only provide general non-product specific information to prospective clients while undertaking marketing activities from an offshore location. The principal restriction to bear in mind here is that any discussion on specific products must be on a reverse enquiry basis and the Manager may provide product specific information from an offshore location, only when the potential client resident in India has directed a request for product specific information. Also, do note that the Bank Approval Requirement would be applicable in all cases where the Manager is a banking entity. 21

26 India 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, the Manager would be permitted to provide details of the investment management services to a prospective client, on a reverse enquiry basis, from an offshore location. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? There are no restrictions on the Manager responding to a request for proposal from a prospective client in India. There would be no difference whether such is request is private or public in nature. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? The Manager would be permitted to meet with prospective client in India as long as he does not solicit business or provide specific information in relation to specific services to clients in India at such meetings. In the event that the Manager receives unsolicited enquiries on the investment management services offered, from clients in India; he may ask such potential clients to contact him when he returns to his offshore location. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? The Manager would be permitted to attend a beauty parade or finals presentation in India as long as he does not solicit business or provide specific information in relation to specific products to clients in India at such occasion. In the event that the Manager receives unsolicited enquiries on the investment management services offered, from clients in India, he may ask such potential clients to contact him when he returns to his offshore location. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? There are no requirements in relation to the language of the agreement. However, do note that the agreement should be sent directly from offshore and should be concluded offshore. 22

27 India (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Under Indian law, there is no restriction on the parties choosing the governing law of the contract executed between them, as long as such choice of law is bona fide and legal and has some connection with the transaction. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? Whilst there are no specific provisions that need to be included, the agreement between the parties should clarify that the Manager would not be providing any investment advisory services in relation to Indian securities. 23

28 India Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. In terms of the provisions of the Foreign Exchange Management Act, 1999 ( FEMA ) and the extant foreign exchange regulations in India, the following categories of investors are permitted to make portfolio investments in foreign securities: Individuals: Indian individual residents are permitted to remit up to USD 250,000 1 for investment in foreign securities, including units of mutual funds, venture funds and acquisition of immovable property outside India, subject to the certain restrictions specified under the foreign exchange regulations, such as: (a) such remittance should not be for margins or margin calls to overseas exchanges / overseas counterparty; (b) such remittance should be in respect of permissible capital or current account transaction or a combination of both, as specified under the FEMA, (c) such remittance should not be for trading in foreign exchange abroad or for purchase of FCCBs issued by Indian companies in the overseas secondary market. Mutual Funds: Mutual funds in India are permitted to invest (within an overall cap of USD 7 billion) in certain classes of foreign securities after obtaining approval from the SEBI, including, equity of offshore listed companies, foreign debt securities in the countries with fully convertible currencies with rating not below investment grade by accredited / registered credit rating agencies, money market instruments rated not below investment grades, units / securities issued by overseas Mutual Funds or Unit Trusts registered with overseas regulators and investing in (a) aforesaid securities, (b) Real Estate Investment Trusts listed on recognized stock exchanges overseas, or (c) unlisted overseas securities (not exceeding 10 per cent of their net assets). Indian Companies: Listed Indian companies are permitted to invest up to 50% of its net worth in shares, rated bonds, fixed income securities of an offshore listed companies. Indian Banks: Banks registered with the RBI as Category I Authorised Dealers are permitted to undertake investments in overseas markets in the following instruments: overseas money market instruments 2, debt instruments issued by a foreign state with residual maturity of less than 1 year and rated at least AA(-) by Standard & Poor / FITCH IBCA or Aa3 by Moody s, etc. If the answer to the above question is no, please go to Part IV. 1 Please refer to this link for the latest liberalized remittance scheme limits: 2 Money market instruments includes any debt instrument whose life to maturity does not exceed 1 year as on date of purchase. 24

29 India 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. As indicated above, whilst there are no regulations prescribed by SEBI for an offering of foreign securities by way of private placement, the IA Regulations introduced by SEBI, seek to govern and regulate the provision of investment advisory services to Indian investors. Although the IA Regulations do not specifically deal with the offering of foreign securities to Indian investors, it is advisable to ensure that the offer of securities is made in such a manner, so as to ensure that the offering retains the character of a private placement and is not construed to be a public issue. Whilst technically, these requirements apply only to Indian securities, we would recommend that the same be complied with even for the marketing and distribution of securities issued by foreign body corporate to Indian residents. Separately, the legal regime governing corporates in India has undergone a change as the Companies Act, 1956 has been replaced by the Companies Act. As indicated above, the new act, in Section 42, prescribes the manner in which companies may offer securities on a private placement basis and stipulates that in case of a private placement, the offer of securities or invitation to subscribe for securities should be made to such number of persons not exceeding fifty or such higher number as may be prescribed. The Companies Rules, formulated under Section 42, prescribe this number as 200 persons, excluding qualified institutional buyers, employees of the company who are offered securities under a scheme of employee stock option and also provide for various other terms and conditions in relation to private placement of securities in India. Whilst the Indian legal framework (including the new Companies Act) does not specifically govern the manner in which foreign securities may be marketed to Indian residents without triggering prospectus requirements, in order to ensure that the distribution of marketing and offering materials relating to the Fund does not constitute an offer or invitation to the public within the meaning of the Companies Act, the following best practices should be observed: i. the marketing and offering materials should be distributed privately to pre-selected prospective investors and should not be made available to the public generally; ii. it is advisable for the entity conducting the offering to have a database of the persons to whom the offer is to be made; iii. the offering document should not be drafted in any way which may give rise to the impression that it is intended to be circulated to the public; iv. each offer should be made to a specified addressee, with no right of renunciation in favour of other persons, and may only be accepted by such addressee; and v. the marketing and offering materials should clearly state that they are private and confidential and for private circulation only and that they may not be further circulated or distributed by the addressee. 25

30 India The law also prescribes certain restrictions in relation to marketing of securities and prohibits such companies from releasing any public advertisements or utilising any media, marketing or distribution channels or agents to inform the public at large about the offer of securities. As indicated above, the Manager may only provide general non-product specific information to prospective clients while undertaking marketing activities from an offshore location and should not undertake any activity which is likely to be construed as marketing of foreign securities. The principal restriction to bear in mind here is that any discussion on specific products must be on a reverse enquiry basis and the Manager may provide product specific information from an offshore location, only when the potential client resident in India has directed a request for product specific information. Also, do note that the Bank Approval Requirement would be applicable in all cases where the Manager is a banking entity. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? There are no specific registration requirements specified for an offering of foreign securities by way of private placement. Also, please see our response to Question 2 in Part III. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? The Manager may only provide general non-product specific information to prospective clients while undertaking marketing activities from an offshore location and should not undertake any activity which is likely to be construed as marketing of foreign securities. The principal restriction to bear in mind here is that any discussion on specific products must be on a reverse enquiry basis and the Manager may provide product specific information from an offshore location, only when the potential client resident in India has directed a request for product specific information. Also, do note that the Bank Approval Requirement would be applicable in all cases where the Manager is a banking entity. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? The representatives of the Fund or the Manager may only provide general non-product specific information to prospective clients in India. The principal restriction to bear in mind here is that any discussion on specific products must be on a reverse enquiry basis and the Manager may provide product specific information from an offshore location, only when the potential client resident in India has directed a request for product specific information. In the event that the Manager or the representatives receives unsolicited enquiries 26

31 India on specific products from clients in India, he may ask such potential clients to contact him when he returns to his offshore location. The Manager should not undertake any activity which is likely to be construed as marketing of foreign securities. Also, do note that the Bank Approval Requirement would be applicable in all cases where the Manager is a banking entity. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? An Indian intermediary registered with SEBI can enter into a referral arrangement with a foreign investment manager to market his products in India. In terms of this agreement, the Indian entity should provide only generic information about the offshore investment manager and can refer interested Indian clients to the foreign investment manager directly for any product specific information. In order to avoid regulatory scrutiny, care should be taken to ensure that the Indian entity should not act as an agent of the offshore adviser and should not engage in any advisory services on behalf of the offshore adviser. Having said that, the possibility of the SEBI IA Regulations being made applicable to the Indian intermediary cannot be entirely ruled out. In such instance, the Indian intermediary would be required to obtain registration as an investment adviser and comply with all obligations under the SEBI IA Regulations. Additionally, the Bank Approval Requirement would be applicable to any banking entity in India acting as agents of overseas mutual funds. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? There is no restriction on the representatives accompanying the local agent while meeting prospective investors in India. However, the representatives should ensure that they only provide generic non-product specific information and should not discuss or provide any specific information in relation to specific products as such activity may be construed as solicitation of business in India leading to permanent establishment and tax concerns. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, the Manager would be permitted to provide details of the Fund to a prospective client on a reverse enquiry basis, from an offshore location. 27

32 India 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? There is no restriction on the Fund accepting an unsolicited investment from a prospective Indian client, so long as such investment is made in accordance to the applicable foreign exchange regulations as indicated in our response to Query 1 in this section above. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? There are no restrictions on the Manager responding to a request for proposal from a prospective client in India, as long as such information is provided from an offshore level. There would be no difference whether such is request is private or public in nature. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? The Manager would be permitted to meet with prospective client in India as long as he does not solicit business or provide specific information in relation to the Fund to clients in India at such meetings. In the event that the Manager receives unsolicited enquiries on the Fund, from clients in India, he may ask such potential clients to contact him when he returns to his offshore location. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? The Manager would be permitted to attend a beauty parade or finals presentation in India as long as he does not solicit business or provide specific information in relation to the Fund to clients in India at such occasion. In the event that the Manager receives unsolicited enquiries, from clients in India, he may ask such potential clients to contact him when he returns to his offshore location. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? There are no requirements in relation to the language of the agreement. However, do note that the agreement should be sent directly from offshore and should be concluded offshore. 28

33 India (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Under Indian law, there is no restriction on the parties choosing the governing law of the contract executed between them, as long as such choice of law is bona fide and legal and has some connection with the transaction. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? In order to retain the non-public nature of the offering, the placement memorandum should be addressed to specific investors and capable of being accepted only by such investors. As a matter of practice, the placement memorandum should be individually numbered and restrictions in copying/reproduction should be imposed, and there ought to be a legend/disclaimer to indicate that it is not for circulation and meant only for the recipient thereof. Also, please see our response to Question 2 in Part III. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? The analysis would remain the same as has been set out in queries 1-13 of Part III, where the Fund is listed on a recognised stock exchange. (b) the Fund was structured as a unit trust rather than as a company? Given that a listed Indian company is only permitted to invest in shares, rated bonds, fixed income securities of an offshore listed company, the foreign exchange regulations would not permit an Indian company to make any portfolio investments in offshore securities of a trust entity. (c) the Fund was structured as a limited partnership rather than as a company? Given that a listed Indian company is only permitted to invest in shares, rated bonds, fixed income securities of an offshore listed company, the foreign exchange regulations would not permit an Indian company to make any portfolio investments in offshore securities of a limited liability partnership. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? Do note that an Indian mutual fund would be permitted to invest in the units of an offshore mutual fund only in compliance with the conditions specified above. 29

34 India (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? The analysis would remain the same as has been set out in queries 1-13 of Part III, where the Fund is a close ended fund. 30

35 India Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? All documents and information (including account opening forms, termsheets, trade orders, account statements, etc.) must be sent to Indian clients from an offshore location and pursuant to reverse enquiry by the Indian client. Further, all documents and agreements must be signed by the Indian client and then sent directly to the offshore location and should be executed offshore. In the event that the Indian client has made offshore investments in a manner permissible under the extant foreign exchange regulations, there are no restrictions on the providing the client with account statements, receiving trade order on a cross-border basis from an offshore location. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? The Manager would be permitted to meet existing clients in India as long as he does not engage in solicitation of business in India which may give rise to permanent establishment and tax concerns. 31

36 India Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? In terms of the SEBI IA Regulations, the business of providing investment advice should only be undertaken by investment advisers who are registered with SEBI. The SEBI IA Regulations seek to regulate investment advisors and require investment advisors to obtain registration with SEBI. Whilst currently, the IA Regulations clearly apply to entities who provide investment advice in relation to Indian securities, there exists some degree of ambiguity in relation to the applicability of the IA Regulations to entities which are based offshore and engaged in providing advisory services to Indian clients on investments in foreign (non-indian) securities. The ambiguity surrounding the application of the IA Regulations to foreign advisers is an issue which has been raised by various stakeholders in their discussions with the regulator. However, there has been no specific clarification issued by SEBI yet in this regard. Additionally, the SEBI IA Regulations also exempt from registration certain other intermediaries, which provide investment advice to their clients incidental to their primary activity, namely: Merchant Bankers regulated by the SEBI (Merchant Bankers) Regulations, 1992 Portfolio Managers regulated by the SEBI (Portfolio Managers) Regulations, 1993 Stock Brokers regulated by the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 Although there are no specific regulations governing the marketing offshore funds in India, it should be noted that RBI, which is responsible for administering the foreign exchange regulations, prohibits all banks (both Indian and foreign), which do not have an operational presence in India, from acting as agents of foreign mutual funds, soliciting foreign currency deposits. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? There are no specific regulations in India governing the marketing of investment management services and the marketing of offshore investment funds in India to Indian residents. As indicated above, the IA Regulations seek to regulate investment advisors and require investment advisors to obtain registration with SEBI. Whilst currently, the IA Regulations clearly apply to entities who provide investment advice in relation to Indian securities, there exists some degree of ambiguity in relation to the applicability of the IA Regulations to entities which are based offshore and engaged in providing advisory services to Indian clients on investments in foreign (non-indian) securities. The ambiguity surrounding the application of the IA Regulations to foreign advisers is an issue which has been raised by various stakeholders in 32

37 India their discussions with the regulator. However, there has been no specific clarification issued by SEBI yet in this regard. Separately, although there are no specific regulations governing the marketing of offshore investment funds in India, the FEMA and the regulations framed under the aegis of the FEMA lay down the framework for Indian residents dealing and transacting in foreign securities. Also, please note that in terms of a report issued by a Ministry of Finance working group on July 30, 2010, the Government of India has recommended that all foreign entities offering securities market related products to Indian residents should be required to register with SEBI as well as fully disclose all details in relation to the investment products, including promotional materials, brochures, advertisements etc. The group is also looking to formulate consumer protection guidelines to ensure that Indian residents are fully informed while investing or trading in financial instruments overseas. Whilst there have been no legislation or rules passed in relation to these recommendations, it is indicative of some policy changes on the horizon. 33

38 Indonesia Questionnaire for Indonesia (the Jurisdiction ) Law Firm: Ali Budiardjo, Nugroho, Reksodiputro Website: Lawyer: Nafis Adwani Telephone: (62-21) Date: 31 October nadwani@abnrlaw.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 34

39 Indonesia Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. All of the above. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. All of the above. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? The above activities are permissible provided that the Manager does not carry out advertisement campaigns (whether individually or together with other parties) especially relating to its services and the products during such public events. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. (i) Permissible, as long as the business cards do not state addresses that are located in Indonesia. (ii) Permissible, as long as the information does not contain any offering of securities. (iii) Permissible as long as such publications will be given for free. Distribution of publications by the Manager that is made in exchange of payment of a sum of money may only be made through an Indonesian branch/subsidiary/counterpart which has a permit to act as investment advisor. (iv) Permissible. (v) Not recommended, since there is a risk that the activity is deemed as public offering under Indonesian capital market laws and regulations. Please see our response in Part III No. 2 below regarding public offering threshold. 35

40 Indonesia (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) (v) the website address of the Manager; other information about the Manager and its services and products. Please see our response in Part I No. 1 (d) above. As long as the information is intended for the people in the Jurisdiction, the restrictions are the same regardless where the Manager resides. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Permissible, but not recommended because of the risk of being accused of bribery attempts, in form of a gratification, if the person who is invited (and paid for) is a government official. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Please see our response in Part I No. 1 (f) above. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. If the information intended to be passed is related to the offering of securities to people in the Jurisdiction or to Indonesian citizens outside of the Jurisdiction, no matter what the manner is (face-to-face, phone, , etc.), the public offering requirements under Indonesian capital market laws and regulations must be observed. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? The Manager may issue general information such as global corporate brochures, overview of economic trends and economic analyses and asset allocations, in so far as such information does not contain any offering of securities and is given for free. 36

41 Indonesia 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? Please see our response in Part I No. 3 above. In so far as the information is intended for the people in the Jurisdiction, the same restrictions apply regardless of where the Manager resides. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? The following are provisions of Directorate General of Taxation s Regulation No. PER-43/PJ/2011 on Stipulation of Resident Tax Subject and Non Resident Tax Subject: An Individual Tax Subject is deemed to have the intention to reside in Indonesia if: a. He/she expressly indicates his/her intention to reside in Indonesia, as evidenced by the following documents: 1) Working Visa; or 2) Limited Stay Permit Card (Kartu Izin Tinggal Terbatas (KITAS)); for more than 183 days or contract/agreement to perform a work, business, or activities in Indonesia for more than 183 days. b. He/she performs activities indicating his/her intention to reside in Indonesia or plan to reside in Indonesia, such as renting or leasing a place, including a residence in Indonesia, moving his/her family member/s including if the place is provided by the other party. 37

42 Indonesia Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. The regulation is silent with regard to the restrictions for investors in making their investment. It will be subject to the prevailing laws where the offshore securities or fund in concern is established. Nevertheless, by having people in the Jurisdiction and/or Indonesian citizens outside the Jurisdiction as clients, an offshore investment Manager must always observe the public offering requirement under Indonesian capital market laws and regulations. Please see our response in Part III No. 2 below in respect of the threshold of a public offering. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Please see our response in Part I No. 4 above. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? If the details contain an offering of securities, then they are subject to the public offering requirement under Indonesian capital market laws and regulations. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Similar to our response in Part II No. 3 above, if the proposal that will be provided by the Manager contains an offering of securities then it must observe the public offering requirements under Indonesian capital market laws and regulations. As we have also mentioned in Part II No. 1 above, the regulation is silent with regard to the restrictions for investors in making their investment. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Please see our response in Part II No. 3 above. 38

43 Indonesia 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Please see our response in Part II No. 3 above. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? Law No. 24, dated 9 July 2009, regarding Flag, Language, National Emblem, and National Anthem ( Law No. 24/2009 ) imposes the requirement that memoranda of agreements or agreements involving, among others, Indonesian private institutions, be set out in Indonesian language, and, if involving a foreign party, the agreement is also set out in the language of the relevant foreign party and/or in English. The text of Law No. 24/2009 is inconclusive in that it does not specify whether agreements to which an Indonesian is a party identified in Law No. 24/2009 that are not set out in Indonesian language are invalid or unenforceable. Law No. 24/2009 stipulates that the implementation of Law No. 24/2009 requires implementing regulations, which are to be issued within 2 (two) years as of issuance of Law No. 24/2009. To date, no implementing regulations have been issued, particularly on the above matter. There have been two arguments in this respect. The first argument provides that as there are no implementing regulations, the requirements must apply to all agreements to which an Indonesian is a party and they must be either in dual language or Indonesian only in order to be valid and enforceable. The second argument, however, provides that Law No. 24/2009 is yet to be effective due to lack of implementing regulations. In June 2013, there was a court decision from West Jakarta District Court, as also affirmed by the Jakarta High Court in Appellate Decision on 7 May 2014 and the Indonesian Supreme Court on 31 August 2015 (West Jakarta District Court, Jakarta High Court and the Indonesian Supreme Court, hereinafter referred to as the Indonesian Court ), favoring the first interpretation, in which the Indonesian Court agrees to the claims by a debtor and decides to, among others, (i) invalidate a loan agreement and (ii) invalidate the related Indonesian security document on the basis that the loan agreement concerned was not translated into Indonesian language and hence breaching Law No. 24/2009. Under Indonesian law, whenever an agreement is invalidated, the parties must go back to their respective original positions as if no agreement has ever been made between them. The Indonesian Court adopts this principle by ordering the debtor to return all of the disbursed loan to the lender. Given this precedence, it is the position of Indonesian Court that all agreements to which an Indonesian is a party must be translated and signed in order to be valid and enforceable. Nevertheless, Indonesia adopts the civil law system. Thus, court decisions in Indonesia do not create precedent or jurisprudence that must be followed in future cases by Indonesian Court. 39

44 Indonesia (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes, the Indonesian civil law system acknowledges the freedom of contracts principle. Therefore, as long as it is not obligated under the specific regulations, the parties to an agreement may choose the governing law of the agreement. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? On the assumption that the appointed Manager is licensed and registered and that it undertakes its business activities outside of the Jurisdiction, aside from the stipulation in Law No. 24/2009 above, no other provisions of Indonesian laws need to be included in this appointment agreement. 40

45 Indonesia Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. As we mentioned in our response Part II No. 1 above, the regulation is silent with regard to the restrictions for investors in making their investment. The matter questioned will be subject to the prevailing laws where the Fund is established. Nevertheless, if people in the Jurisdiction and/or Indonesian citizens outside the Jurisdiction invest in the Fund, the Manager must always observe the public offering requirements under Indonesian capital market laws and regulations. Please see our response in Part III No. 2 below in respect of the threshold of a public offering. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. (a) A non-public offering is not required to be authorised or registered. (b) The regulation is silent on this issue. However, private equity funds can only be offered to professional investor. (c) A non-public offering is an offering other than offerings that: - takes place within a certain time (i.e., 12 (twelve) months) and in specified amounts (i.e., Rp1,000,000,000 (one billion Rupiah) or more), and offered either through the mass media, or otherwise to more than 100 (one hundred) parties, or resulting in sales to more than 50 (fifty) parties. In determining whether there has been a public offering to more than 100 parties, it is not relevant that the offering is followed by the purchase of securities. However, the sale of securities to more than 50 parties is determined by the actual purchase of securities, whether or not associated with an offer. (d) See our response in Part III No. 2 (c) above. (e) There is common practice to include Indonesian selling restrictions in the offering documents which substantially covers the essence of the following statement: The securities have not been and will not be offered or sold, directly or indirectly, in Indonesia or to citizens of Indonesia (wherever located), entities or residents in Indonesia in a manner which constitutes a public offering under the laws and regulations of Indonesia. 41

46 Indonesia 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? Please see our response in Part III point 2 above. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? The Manager must observe the public offering requirements under Indonesian capital market laws and regulations. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? In this regard, the representative must observe the public offering requirements under Indonesian capital market laws and regulations. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? Yes. The local agent must be a securities company established in the form of Indonesian limited liability company which has a license as a broker-dealer that is issued by the Indonesian Financial Services Authority (previously known as Bapepam-LK). Further, in marketing the Fund, the local agent must also observe the public offering requirements under Indonesian capital market laws and regulations. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? The representative of the Fund may accompany the local agent. However, such representative should refrain from any marketing and offering related activities in respect of the Fund or any other securities whatsoever. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? The Manager must observe the public offering requirements under Indonesian capital market laws and regulations. 42

47 Indonesia 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Like we mentioned in Part III No. 8 above, the Fund must observe the public offering requirements under Indonesian capital market laws and regulations. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Please see our response in Part III No. 8 above. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Like we mentioned in our response in Part III No. 8 above, they must observe the public offering requirements under Indonesian capital market laws and regulations. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Please see our response in Part III No. 8 above. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? Please see our response in Part II No. 7 (a) above. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes, the Indonesian civil law system acknowledges the freedom of contracts principle. Therefore, as long as it is not specially provided for in specific regulations, the parties to an agreement may choose the governing law of the agreement. 43

48 Indonesia (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? By assuming that the Fund is an offshore fund which is established and registered outside the Jurisdiction, aside from the stipulation in Law No. 24/2009 above, no other requirements under Indonesian laws are applicable to this subscription agreement. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. (b) the Fund was structured as a unit trust rather than as a company? No. (c) the Fund was structured as a limited partnership rather than as a company? No. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No. 44

49 Indonesia Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? There is no restriction to send any information related to the client s investment portfolio or investment in the Fund. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes, in so far it is intended to maintain Manager-Client relationship. Nevertheless, similar to our response in Part II No. 1, by having people in the Jurisdiction and/or Indonesian citizens outside the Jurisdiction as clients, an offshore investment Manager must always observe the public offering requirement under Indonesian capital market laws and regulations. 45

50 Indonesia Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Financial Services Authority (locally known as Otoritas Jasa Keuangan or OJK). 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Law No. 8 of 1995 on Capital Market. 46

51 Japan Questionnaire for Japan (the Jurisdiction ) Law Firm: Nishimura & Asahi Website: Lawyer: Shimpei Nakada Telephone: Toshiyuki Yamamoto Date: 31 October s_nakada@jurists.co.jp to_yamamoto@jurists.co.jp In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is just for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to any of the contacts listed. 47

52 Japan Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Overview In principle, anyone soliciting the Fund to investors in the Jurisdiction is required to be registered as a financial instruments business operator that conducts Type I business ( Type I FIBO ) under the Financial Instruments and Exchange Act of Japan (the FIEA ). The FIEA has no clear definition of solicitation. The concept of solicitation under the FIEA is fact-oriented, and the boundary line is not invariably clear. We believe whether or not the Manager refers to a specific product (e.g., the name, details and investment performance of the Fund) in his/her activities would be one of the practical approaches to determine such boundary. This is because discussing a specific product with people in the Jurisdiction could promote people s interest in such product. On the other hand, talking about general market conditions as well as general matters regarding the Manager (e.g., corporate history) without referring to a specific product is unlikely to be considered solicitation for the FIEA s purposes. We will respond to the questions below, being subject to the above general considerations. Answer The Manager is likely to be permitted to attend seminars and other relevant events. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. The Manager is likely to be permitted to speak at seminars and other relevant events. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? The Manager is likely to be permitted to sponsor seminars and other relevant events. We think there is no difference between being the primary sponsor and one of a number of sponsors. 48

53 Japan (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Items (i) to (iv) are likely to be permitted for the Manager. Item (v) could carry a risk that the Manager is considered to conduct solicitation of the Fund. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Same as (d) above. So long as investors domiciled in Japan receive solicitation, it will be subject to the FIEA regulations even if it is made from overseas. This is because one of the main purposes of the FIEA is to protect the interests of investors domiciled in Japan. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. The Manager is likely to be permitted to invite (and pay for) people in the Jurisdiction to attend lunches and other social events. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Same as (f) above. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Cold calling would not be permitted, since a cold call is likely to constitute solicitation. Please see overview in 1(a). 49

54 Japan 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? Again, discussing a specific fund with people in the Jurisdiction is unlikely to be permitted without registration as a Type I FIBO. On the other hand, talking about general market conditions as well as general information concerning the Manager is likely to be permitted without registration. Please see overview in 1(a). 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? Same as 3 above. Please see argument in 1(e). 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? Under the Immigration Control and Refugee Recognition Act of Japan, if an employee of the Manager is a foreigner, he/she is required to have a valid passport and visa prior to the entrance to Japan in principle. The Japanese Government, however, provides visa exemptions for certain countries/jurisdictions. Detail of visa exemption (such as the period of stay) varies depending on each country/jurisdiction. Generally, a visa exemption applies only to a temporary stay and does not apply to an employment and other similar activities. As a general rule, for Non-resident (as defined in the Income Tax Act) or Foreign Corporation (as defined in the Corporation Tax Act), only income originated in Japan (domestic source income) is taxable in Japan. 50

55

56 Japan 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? As stated, discussing the Manager s investment management services with prospective investors would require the Manager to be registered as an IM FIBO. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Substantially the same as 5 above. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? There is no clear legislative requirement for languages with regard to the agreement, however, we think it is advisable to use a language familiar to a (prospective) investor so that the investor can easily understand the agreement. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? Generally, no. However, the rules of the Japan Securities Investment Advisers Association, one of the self-regulatory bodies for investment managers/advisors in the Jurisdiction, require that a specific language be set in the investment management agreements that members enter into with their clients. 52

57 Japan Part III Cross-Border Marketing of Unregistered Offshore Funds Non- Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Yes, so long as the Fund files the ITICL Notification (as defined and more fully explained in 2 below). If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. (a) We assume the Fund is considered a foreign investment company under the Investment Trust and Investment Company Law of Japan (the ITICL ). The ITICL requires that any fund offered in Japan on a non-public basis file a notification (the ITICL Notification ) (written in Japanese) with the Commissioner of the Financial Services Agency of Japan ( FSA ) prior to the commencement of the private placement in the Jurisdiction. Further, the applicable fund would also have to file a post-sale report if more than 1 billion yen is sold under Japan s Foreign Exchange and Foreign Trade Act. (b) The Fund may be able to sell its shares to an investor in the Jurisdiction by reliance on the following three private placement exemptions that do not require general registration under the FIEA: (a) a private placement for qualified institutional investors ( QIIs ) only; (b) a small number private placement; and (c) a private placement for certain professional investors (defined as specified investors in the FIEA) only. (c) The number of prospective investors in (b) a small number private placement above must be 49 or less (provided that QIIs need not be counted if certain transfer restrictions are imposed and certain other requirements are met). There is no restriction on the number of prospective investors for a private placement for QIIs only. (d) There is no clear restriction regarding the minimum investment amount. 53

58 Japan (e) In the case of a private placement for QIIs only or a small number private placement, the legend stipulated under the FIEA must be notified to investors. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? Once the Fund files the ITICL Notification, the Fund must file an updated notification prior to any material change to the information set forth in the ITICL Notification (or promptly thereafter, if the change is not foreseen). However, company-type foreign funds do not need to provide investors with investment reports in the prescribed form under the ITICL. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? In principle, the Manager cannot conduct marketing activities towards investors in the Jurisdiction without being registered as a Type I FIBO. On the other hand, activities that are not considered solicitation are permitted, but in very limited circumstances. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? Under the FIEA, the Fund itself (including its representatives) may market the Fund to prospective investors in the Jurisdiction without registration. Any other persons other than the Fund, including the Manager, cannot market the Fund without registration as a Type I FIBO. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? Yes. A local agent that is retained to market the Fund must be registered as a Type I FIBO. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? Yes, however, the Manager cannot solicit the Fund. See 5 above. 54

59 Japan 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? See 4 and 5 above. It may not be permitted since it is highly likely a response covering details of the Fund will be considered solicitation. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? See 4 and 5 above. It may not be permitted since it is highly likely such activities will be considered solicitation. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? See 4 and 5 above. The Manager is not permitted to do so since it is highly likely such activities will be considered solicitation. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? See 4 and 5 above. It may not be permitted since it is highly likely such activities will be considered solicitation. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? Same as Part II 7(a). (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. 55

60 Japan (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? See 2(e) above. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? Whether or not the shares in the Fund were listed on an overseas stock exchange would not change our answers above. (b) the Fund was structured as a unit trust rather than as a company? Marketing of interests in the Fund structured as a unit trust is subject to broadly similar regulations as those for the Fund structured as a company. However, there are still some differences. The followings are important differences in relation the questions in Part III: Part III 3: Under the ITICL, the Fund is required to provide investors with investment reports in the prescribed form. Part III 5: Under the FIEA, the Manager may NOT market the Fund to prospective investors in the Jurisdiction unless the Manager is registered as a financial instruments business operator that conducts Type II business ( Type II FIBO ). Generally, registration as a Type II FIBO is required to conduct certain securities businesses including offering of unit trusts, interests in collective investment scheme and other types of certain securities. (c) the Fund was structured as a limited partnership rather than as a company? Marketing of interests in the Fund structured as a limited partnership is subject to significantly different regulations under the FIEA. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No. 56

61 Japan Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? Sending information is permitted, unless it is considered solicitation. Soliciting an additional purchase of the Fund or soliciting another product is likely to be prohibited without registration as a Type I FIBO. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? See 1 above. 57

62 Japan Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? In principal, the regulator that is responsible for regulating these activities under the FIEA is the Commissioner of the FSA. Some authority is also delegated to the director general of the local finance bureau in Japan. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The FIEA, the ITICL, and Japan s Foreign Exchange and Foreign Trade Act. 58

63 Malaysia Questionnaire for Malaysia (the Jurisdiction ) Law Firm: SKRINE Website: Lawyer: Phua Pao Yii Telephone: Date: 31 October ppy@skrine.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 59

64 Malaysia Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Permitted with restrictions. Permitted provided that the Manager does not, whether as principal or agent, carry on a business in any regulated activity or hold himself out as carrying on such business in Malaysia. There are 7 types of regulated activities under the Capital Markets and Services Act 2007 (CMSA) which are "dealing in securities", dealing in derivatives, "fund management", "advising on corporate finance", "investment advice", "financial planning" and dealing in private retirement schemes these regulated activities are defined in greater detail in the CMSA. The Manager is required to hold the requisite licence issued by the Securities Commission prior to undertaking any regulated activities in Malaysia. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. Permitted with restrictions. Permitted provided that the Manager does not, whether as principal or agent, carry on a business in any regulated activity or hold himself out as carrying on such business in Malaysia. In this context, the Manager is not permitted to solicit clients or promote / market / advertise its products and services at the industry event. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? Permitted with restrictions. Permitted provided that the Manager does not, whether as principal or agent, carry on a business in any regulated activity or hold himself out as carrying on such business in Malaysia. In this context, the Manager is not permitted to solicit clients or promote / market / advertise its products and services at the industry event. 60

65 Malaysia (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Permitted with restrictions. Permitted provided that the Manager does not, whether as principal or agent, carry on a business in any regulated activity or hold himself out as carrying on such business in Malaysia. In this context, the Manager is allowed to socialise and distribute business cards as part of the social setting but is not permitted to solicit clients or promote / market / advertise its products and services at the industry event. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Permitted with restrictions. Permitted provided that it is upon the prospective client's own demand (i.e. it is a "reverse inquiry" from the prospective client). The Manager should maintain evidence that the "reverse inquiry" had occurred. However, recurring "reverse inquiries" may trigger the need for a licence as it raises doubt as to whether the Manager is in fact soliciting clients in Malaysia and may lead to the inference that the Manager is carrying on business in Malaysia. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Permitted with restrictions. Permitted provided that the Manager does not, whether as principal or agent, carry on a business in any regulated activity or hold himself out as carrying on such business in Malaysia. In this context, the Manager is not permitted to solicit clients or promote / market / advertise its products and services in Malaysia. 61

66 Malaysia (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Permitted. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Yes. The Manager is not permitted to solicit clients or promote / market / advertise its products and services in Malaysia without holding the requisite licence under the CMSA. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? No. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? Strictly speaking, no. However, we are aware that there may be marketing activities being undertaken or carried out from outside the jurisdiction in relation to people who are in the jurisdiction. The fact that these take place does not mean that a foreign manager is permitted to carry out such marketing activities. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? Generally, follow up meetings in Malaysia with the client who had sought and engaged the Manager (on a "reverse inquiry" basis) will not trigger the licensing requirement under the CMSA, provided that the services are performed outside of Malaysia and the Manager has no physical presence in Malaysia. However, the Manager is required to be licensed if it markets its services or products in Malaysia or meets with clients locally to market its services or products. The Manager's representative may enter Malaysia for social or business purposes with a valid passport and a visa (if required). The Manager's representative will be subject to personal tax if he is deemed to be deriving employment income from Malaysia. Under Malaysian tax laws, a person is deemed to be deriving employment income from Malaysia if, inter 62

67 Malaysia alia, he exercises the functions of his employment for any period in Malaysia. The Manager is subject to corporate tax in Malaysia if, as a consequence of the activities it carries out in Malaysia, the Manager is deemed to be carrying on a business in Malaysia or is deemed to constitute a permanent establishment in Malaysia. The issue of whether a corporate entity is deemed to be carrying on business in Malaysia is a question of fact. The issue of whether a corporate entity is deemed to have a permanent establishment in Malaysia is subject to the relevant provisions in the double taxation treaty (if any) entered into with Malaysia by the corporate entity's country of incorporation. 63

68 Malaysia Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Permitted. We assume that the offshore investment manager is managing the segregated mandate outside of Malaysia. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? No if the marketing activities take place entirely outside Malaysia. Note that there is a distinction between:- (i) marketing activities undertaken outside the Jurisdiction; and (ii) marketing activities undertaken from outside the Jurisdiction. The Manager is not permitted to solicit clients or promote / market / advertise its products and services in Malaysia without holding the requisite licence under the CMSA. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. The Manager should maintain evidence that the "reverse inquiry" had occurred. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes. The Manager should maintain evidence that the "reverse inquiry" had occurred. In our view, there is a difference if the "request for proposal" is open to anyone as this would mean that the Manager's response was not the result of a "reverse inquiry". As such, in our view, responding to a public "request for proposal" is not permitted. 64

69 Malaysia The "reverse enquiry" relaxation from the requirement to be licensed is pursuant to an FAQ issued by the Securities Commission (SC) and therefore may be referred to as a policy stance taken by the SC. It is not explicitly stated in the FAQ that there must be "direct contact". The phrase used in the FAQ is "sought and engaged the [Manager]". Our interpretation of the FAQ is that a response by the Manager to a public "request for proposal" may not be construed by the SC as a "reverse enquiry". 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Generally, follow up meetings in Malaysia with the client who had sought and engaged the Manager (on a "reverse inquiry" basis) will not trigger the licensing requirement under the CMSA, provided that the services are performed outside of Malaysia and the Manager has no physical presence in Malaysia. However, the Manager is required to be licensed if it markets its services or products in Malaysia or meets with clients locally to market those services or products. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Generally, follow up meetings in Malaysia with the client who had sought and engaged the Manager (on a "reverse inquiry" basis) will not trigger the licensing requirement under the CMSA, provided that the services are performed outside of Malaysia and the Manager has no physical presence in Malaysia. However, the Manager is required to be licensed if it markets its services or products in Malaysia or meets with clients locally to market its services or products. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No. The answer is based on the following assumptions: (i) the Manager did not solicit, in Malaysia, clients or promote / market / advertise its products and services in Malaysia; and (ii) any services provided by the Manager are performed outside of Malaysia. 65

70 Malaysia (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. The answer is based on the following assumptions: (i) the Manager did not solicit, in Malaysia, clients or promote / market / advertise its products and services in Malaysia; and (ii) any services provided by the Manager are performed outside of Malaysia. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? No. The answer is based on the following assumptions: (i) the Manager did not solicit, in Malaysia, clients or promote / market / advertise its products and services in Malaysia; and (ii) any services provided by the Manager are performed outside of Malaysia. 66

71 Malaysia Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. There are no rules or restrictions which limit the types of investments that a Malaysian investor can make (subject to the relevant foreign exchange administration rules). If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. Any person who intends to make available, offer for subscription or purchase, or issue an invitation to subscribe for or purchase unlisted capital market products (namely foreign securities / capital market products) in Malaysia is required to seek recognition of the SC and register a disclosure document with the SC. The term listed is defined to mean such security or corporation whose securities or any class of its securities having gained admission to be quoted on a stock market of a stock exchange. The term stock exchange in this context refers to Bursa Malaysia. Hence, the securities constituting the offering would be deemed to be unlisted for the purposes of the CMSA. However, if the proposal falls within one of the categories of transactions specified in Schedule 5 of the CMSA, then such a proposal is exempted from the requirement to obtain SC s recognition. There are several categories, and sub-categories, of transactions, persons or securities listed in Schedule 5. For example, paragraph 10 of Schedule 5 provides as follows: Making available, offering for subscription or purchase of, or issuing an invitation to subscribe for or purchase, shares, except shares in a closed-end fund, that are listed or approved for listing and quotation on an exchange outside Malaysia, to [specified persons] provided that such exchange is specified by the Commission and the distribution of such shares is made by a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. Such persons referred to in Paragraph 10 of Schedule 5 includes, inter alia: (i) a person who acquires shares, as principal, for a consideration of not less than RM250,000 or its equivalent in foreign currencies for each transaction whether such amount is paid for in cash or otherwise; 67

72 Malaysia (ii) an individual whose total net personal assets, or total net joint assets with his or her spouse, exceeds RM3 million or its equivalent in foreign currencies, excluding the value of the primary residence of the individual; (iii) an individual who has a gross annual income exceeding RM300,000 or its equivalent in foreign currencies per annum in the preceding 12 months; (iv) an individual who, jointly with his or her spouse, has a gross annual income exceeding RM400,000 or its equivalent in foreign currencies per annum in the preceding 12months; (v) a corporation with total net assets exceeding RM10 million or its equivalent in foreign currencies based on the last audited accounts; (vi) a partnership with total net assets exceeding RM10 million or its equivalent in foreign currencies; These persons falling within paragraph 10 of Schedule 5 are generally "sophisticated investors" (although the term sophisticated investors is not defined in the CMSA). Note that the Fund must still register a disclosure document with the SC. This is pursuant to the Guidelines on Disclosure Documents ( Guidelines ) issued by the SC which provides that the requirement to deposit (for purposes of registration) a disclosure document does not apply to any proposal that falls within Schedule 5 of the CMSA, other than paragraphs 8(b), 8(g) other than when the making available, offering for subscription or purchase, or issuing an invitation to subscribe for or purchase is made to existing holders of such shares and 10. As the offering of the Fund to the aforesaid sophisticated investors falls within paragraph 10of Schedule 5 of the CMSA, a disclosure document must be registered with the SC. In addition to obtaining recognition from the SC and registering a disclosure document, a person shall not issue, offer for subscription or purchase or make an invitation to subscribe for or purchase any securities unless:- (i) a prospectus in relation to the securities has been registered by the SC; and (ii) the prospectus complies with the requirements or provisions of the CMSA. Under the Guidelines for the Offering, Marketing and Distribution of Foreign Funds, the term foreign funds means a collective investment scheme ( CIS ) that is primarily regulated in a jurisdiction other than Malaysia, whether unlisted or listed on an exchange in that jurisdiction. On the basis that the Fund in this case is a CIS, the Prospectus Guidelines for Collective Investment Schemes would be applicable. The Prospectus Guidelines for CIS provide, inter alia, that the prospectus in relation to the offering of a foreign fund must contain the following statements of disclaimer: The fund is established in a foreign jurisdiction and is regulated by the regulator in the foreign jurisdiction. As such, the fund is not subjected to the requirements of the Guidelines on Unit Trust Funds issued by the Securities Commission Malaysia. The Securities Commission Malaysia has recognised the fund and 68

73 Malaysia a copy of this prospectus has been registered with the Securities Commission Malaysia. The recognition of the fund, and registration of this prospectus, should not be taken to indicate that Securities Commission Malaysia recommends the said fund or assumes responsibility for the correctness of any statement made, opinion expressed or report contained in this prospectus. The Securities Commission Malaysia is not liable for any nondisclosure on the part of the operator responsible for the said fund and takes no responsibility for the contents in this prospectus. The Securities Commission Malaysia makes no representation on the accuracy or completeness of this prospectus, and expressly disclaims any liability whatsoever arising from, or in reliance upon, the whole or any part of its contents. Assuming that the offer document in this case is issued in respect of categories of persons or transactions which constitute excluded offers, excluded invitations or excluded issues (as set out in Schedule 6 and Schedule 7 of the CMSA), the offer document would be exempt from strict compliance of various provisions pertaining to prospectus requirements in the CMSA. The categories of persons or transactions set out in Schedule 6 and Schedule 7 of the CMSA include, inter alia:- (a) an offer or invitation made to a person who acquires securities pursuant to a private placement, if the aggregate consideration for the acquisition is not less than RM250,000 or its equivalent in foreign currency for each transaction whether such amount is paid for in cash or otherwise; (b) an offer or invitation or an issue made to an individual whose total net personal assets, with his or her spouse, exceed RM3 million or its equivalent in foreign currencies, excluding the value of the individual s primary residence. (c) an offer or invitation or an issue made to a corporation with total net assets exceeding RM10 million or its equivalent in foreign currencies based on the last audited accounts. Hence, unless the proposal is exempted from the requirement to obtain SC s recognition under Schedule 5, the prior recognition of the SC would have to be obtained even if the offer or invitation or issue is an excluded offer, excluded invitation or excluded issue. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? The Fund will be required to comply with the terms and conditions imposed by the SC when SC grants recognition. For example, the Fund may only be promoted and marketed in Malaysia by a person holding the requisite licence under the CMSA. 69

74 Malaysia 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? No restrictions if the marketing activities take place entirely outside of Malaysia. The prior recognition of the SC for a person to make the offer or invitation to subscribe for the shares (in the Fund) in Malaysia, must be obtained before any offer document can be distributed. Unless the recognition of the SC is obtained, no communication of the offer is to be made in Malaysia and no document relating to the offering is to be distributed in Malaysia. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? No. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? If the recognition of the SC has been obtained, the Fund may only be promoted and marketed in Malaysia by a person holding the requisite licence under the CMSA. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? The Fund or the Manager should obtain the recognition of the SC prior to carrying out such arrangements with the local agent. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Strictly speaking, no - unless the prior recognition of the SC is obtained. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes. 70

75 Malaysia 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Strictly speaking, no - unless the prior recognition of the SC is obtained. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Not permitted if the purpose of the meeting / discussion is to market or promote the Fund unless the prior recognition of the SC is obtained. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Not permitted unless the prior recognition of the SC is obtained. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. However, if we assume that the Fund requires the prior recognition of the SC and is required to comply with the prospectus requirements under the CMSA, then the agreement must be in the English or Malay language. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? No. However, if we assume that the Fund requires the prior recognition of the SC and is required to comply with the prospectus requirements under the CMSA, then the agreement must include provisions as required under the CMSA and other relevant guidelines. 71

76 Malaysia 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. The requirement to obtain SC s recognition applies to all capital market products (which includes securities, derivatives, a private retirement scheme, a unit trust scheme, any product or arrangement which is based on securities or derivatives) which is not listed on Bursa Malaysia. It does not matter whether the product is listed on a stock exchange outside Malaysia. Note that the Fund may be exempted (under Schedule 5) from the requirement to obtain the SC's prior recognition provided that certain provisos are met (e.g. the shares may only be offered to certain specified categories of investors). However, pursuant to the SC s Guidelines For the Offering, Marketing and Distribution of Foreign Funds, only:- (i) exchange-traded funds which are index-tracking and non-synthetic; and (ii) listed closed-end funds ( CEF ) may be offered, marketed or distributed in Malaysia, subject to the requirements under the said Guidelines. (b) the Fund was structured as a unit trust rather than as a company? The SC introduced and implemented a Lodge and Launch ( LOLA ) Framework with effect from 15 June However the LOLA framework only covers 4 unlisted capital market products, which are: (i) Wholesale Funds; (ii) Structured Products; (iii) Private Debt Securities; and (iv) Asset-backed Securities. A Wholesale Fund is defined to mean a unit trust scheme established where the units are to be issued, offered for subscription or purchase, or for which invitations to subscribe for or purchase the units are to be made, exclusively to sophisticated investor. Structured Products are defined to mean any investment product that falls within the definition of securities under the CMSA and which derives its value by reference to the price or value of an underlying reference. Private Debt Securities are defined to mean debentures as defined in the CMSA but do not include (a) structured products; and (b) debentures issued by (i) the Federal Government; (ii) any State Government; or (iii) Bank Negara Malaysia. Asset-backed Securities are defined to mean private debt securities or sukuk that are issued pursuant to a securitisation transaction. Such ABS shall exclude any private debt securities or sukuk with convertible or exchangeable features. If the Fund is structured as a unit trust and is targeted exclusively to sophisticated investors: 72

77 Malaysia (i) it would constitute a wholesale fund under the LOLA Framework; and (ii) it can only be launched in Malaysia provided that it has been established by an operator in its home jurisdiction and complies with the requirements under the Guidelines for the Offering, Marketing and Distribution of Foreign Funds. (c) the Fund was structured as a limited partnership rather than as a company? No. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? Pursuant to the SC s Guidelines For the Offering, Marketing and Distribution of Foreign Funds, listed closed-end funds ( CEF ) may be offered, marketed or distributed in Malaysia, subject to the requirements under the said Guidelines. If the fund is a listed CEF, it may be offered, marketed or distributed in Malaysia, subject to the requirements under the said Guidelines. 73

78 Malaysia Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? The Manager can provide investment updates and advice based upon the client's mandate. However, the Manager is not permitted to provide information in relation to its other products and services unless it is upon the client's own demand. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? The Manager can meet the existing client to discuss the client s investment portfolio or investment in the Fund based upon the client's mandate. However, the Manager is not permitted to provide information in relation to its other products and services unless it is upon the client's own demand. 74

79 Malaysia Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The Securities Commission. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Capital Markets and Services Act

80 PRC Questionnaire for the People s Republic of China (the Jurisdiction ) Law Firm: Deacons Website: Lawyer: Taylor Hui Telephone: Date: 31 October taylor.hui@deacons.com.hk In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 76

81 PRC Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. There are no specific rules on this. So long as the Manager (i) refrains from taking any actions or making any statements that might be viewed as providing investment management services or investment advice in relation to PRC capital markets (in other words, the Manager may not hold itself out as providing such services) and (ii) does not mention any Funds or otherwise provide fund specific information to avoid being viewed as offering Funds to the general public in China. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. Same as above. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? There are no specific rules on this. Sponsorship of this nature is fine and it does not make any difference whether the Manager is the primary sponsor or only one of a number of sponsors. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Items (i) through (iv) are permissible. Whilst item (v) is also permissible, product specific information should be omitted to avoid being viewed as offering products to the public. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; 77

82 PRC (iii) (iv) (v) publications of the Manager that are educational in nature or general market commentary only; the website address of the Manager; other information about the Manager and its services and products. Items (i) through (v) are permissible. Regarding item (v), where Fund offering documents are mailed from outside of China to targeted investors in China. Currently Targeted investors typically include: financial institutions (such as securities companies, trust companies, banks, fund management companies, insurance companies) that have a "Qualified Domestic Institutional Investor" licence in China (commonly referred to as "QDII"). QDII licences allow these institutions to raise money in China and remit the money to overseas for investment purposes. some quasi-governmental entities such as China Investment Corporation (China's sovereign fund), National Social Security Fund (China's national pension fund), and the State Administration of Foreign Exchange. other corporations, and high net worth individuals, though there is no official definition of such term in the context of offshore investment. These investors would obtain approval and make arrangements to remit funds overseas. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. This is fine from PRC Securities Law perspective, subject to anti-corruption laws of other jurisdictions. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Same as above. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. There are no specific rules on cold calling. Our advice would not change if the Manager initiates the communication on its own without requests from potential investors. 78

83 PRC 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? General activities are permitted other than advertising and anything which may be viewed as offering to the public. An introduction of the Manager s services, general capabilities, investment philosophies, etc. without fund specific information is permissible. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? Activities conducted outside of China are not regulated by PRC laws and regulations. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? No, subject to visa restrictions. 79

84 PRC Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. China has strict currency controls. Currently specific categories of investors are permitted under regulations to appoint offshore investment managers primarily including: financial institutions (such as securities companies, trust companies, banks, fund management companies, insurance companies) that have a QDII licence. some quasi-governmental entities such as China Investment Corporation (China's sovereign fund), National Social Security Fund (China's national pension fund), and the State Administration of Foreign Exchange. Each type of QDII entity and the quasi-governmental entities may be subject to different sets of regulations and rules. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Activities conducted outside of China are not regulated by PRC laws and regulations. The Manager can call, , and fax materials regarding its capacities and management services to the prospective investors as described in Part II question 1 above. Activities undertaken should not be perceived as the Manager providing investment management services onshore nor services related to PRC capital markets, securities and mutual funds domiciled in the PRC. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes. There would be no difference whether a request for proposal is private or public. 80

85 PRC 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Yes. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Yes. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? There may be provisions required to be included in the agreement depending on the type of the investor. QDII entities and the quasi-governmental entities are subject to different sets of regulations and rules. 81

86 PRC Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. PRC insurance companies that have QDII licences may invest in offshore private equity investment funds. Quasi-governmental entities have separate investment scopes which may vary from mandate to mandate. There are no restrictions on corporations and high net worth individuals from investing into the Fund, save that they are required to obtain approvals to remit funds overseas. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. (a) There is no authorisation/registration regime available for foreign funds or foreign managers; (b) Where the Fund is a private equity fund which meet certain requirements, PRC insurance companies that have QDII licences, quasigovernmental entities and other corporations and individuals; (c) n/a; (d) depends on the specific product; (e) there is no required disclaimer under PRC law but the following warning statement may be referenced: "No invitation to offer, or offer for, or sale of, the Fund s shares will be made to the public in China (which, for such purposes, does not include the Hong Kong or Macau Special Administrative Regions or Taiwan) or by any means that would be deemed public under the laws and regulations of China. The information relating to the Fund s shares contained in this Memorandum has not been submitted to or approved by the China Securities Regulatory Commission nor any other relevant governmental authority in China. The Fund s shares may only be offered or sold to Chinese investors that are authorized to buy and sell securities denominated in foreign currencies. Potential investors resident in China are responsible for obtaining all relevant approvals from the relevant Chinese government authorities, including but not limited to the State Administration of Foreign Exchange, before purchasing the Fund s shares." As a point of reference, private funds formed in China are 82

87 PRC subject to PRC private placement rules in offering to investors, which are summarized below:- (a) the private offering shall be conducted towards Qualified Investors only, the number of which shall be no more than 200 cumulatively. (b) a Qualified Investor as referred to in paragraph (a) above should:- (i) (ii) (iii) be able to identify and bear the corresponding risk; invest not less than RMB1 million in a single private fund; and in respect of an individual investor, have no less than RMB3 million financial assets ; or have no less than RMB500,000 average annual income over the past 3 years; in respect of an institutional investor, should have no less than RMB10 million net asset. The financial assets above shall include bank deposits, stocks, bonds, fund units, asset management schemes, bank wealth management products, trust schemes, insurance products and futures interests etc. (c) any of the following investors shall be treated as Qualified Investors and exempted from fulfilling the requirements described in paragraph (b) above:- (i) (ii) (iii) (iv) pension funds including social security funds and enterprise annuity funds, social welfare funds including charity funds; investment schemes set up legally and filed with the Asset Management Association of China; private fund managers who invest in the private funds under their management and their employees; or other investors approved by the China Securities Regulatory Commission (CSRC). (d) In the case that a non-legal entity, such a partnership or a trust directly or indirectly invests in a private fund by pooling capital from many other investors, its ultimate investors shall be counted in considering the numerical limit (200 investors cumulatively) and each of such ultimate investors shall be a Qualified Investor (Look-through Examination). However, in the case that the investors who fall within the scope of item (i), (ii) or (iv) in paragraph (c) above invest in private funds, the Lookthrough Examination shall not apply. (e) In addition to the requirements of targeting only the Qualified Investors, private fund managers and distributors are prohibited from promoting or marketing to non-specific targets via public media such as newspaper, radio, television, internet or seminar, presentation, workshop and notice, brochure, cell phone text, Wechat (an instant communication application in China), blog, etc. Since Funds are not incorporated in the PRC and shall fall outside of the PRC regulations on domestic funds, the above private placement rules will not 83

88 PRC apply. However, the concept of private placement laid down under the PRC regulations shall be taken as a reference. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? There is no authorisation/registration regime available for foreign funds. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? All marketing activities conducted by the Manager shall be on a private basis and to specific targets only. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? Yes. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? A local placement agent may be appointed. Apart from QDIIs which are clearly allowed to invest in offshore securities, it would be prudent not to contract any regulated/licensed entities/individuals as local agent in the PRC to avoid triggering any regulatory issues. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? The representatives of the Fund or the Manager may accompany the local agent to meet with prospective investors. If it is a strictly one-to-one private basis, then they may discuss fund specific information, performance data, etc 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, to insurance companies (in case of the Funds being qualified private equity funds) with a QDII licence and the quasi-governmental entities; corporations and individual investors. 84

89 PRC 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Same as above. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Same as above. There is no difference whether the request for proposal is private or public, although the Manager should communicate Fund information on a strict private basis. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Yes. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Yes. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? There may be provisions required to be included in the contract depending on the type of the investor. Each type of QDII entities and the quasigovernmental entities may be subject to different sets of regulations and rules. 85

90 PRC 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. (b) the Fund was structured as a unit trust rather than as a company? No. (c) the Fund was structured as a limited partnership rather than as a company? No. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No. 86

91 PRC Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? No. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes. 87

92 PRC Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The CSRC is the regulator for fund management companies and securities companies and their respective products; The China Banking Regulatory Commission (CBRC) is the regulator for banks and trust companies and their respective products; The China Insurance Regulatory Commission (CIRC) is the regulator for insurance companies and their products; The State Administration of Foreign Exchange (SAFE); The People s Bank of China (PBOC). 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The PRC Securities Laws, the PRC Securities Investment Fund Laws and relevant QDII regulations issued by the CSRC, CIRC, CBRC, SAFE and PBOC. 88

93 Philippines Questionnaire for the Philippines (the Jurisdiction ) Law Firm: SyCip Salazar Hernandez & Gatmaitan Website: Lawyer: Rafael A. Morales Telephone: Date: 31 October ramorales@syciplaw.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 89

94 Philippines Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. The Supreme Court of the Philippines has applied the continuity test in determining whether or not a foreign corporation is doing business in the Philippines. As early as the case of The Mentholatum Co., Inc., et al. v. Mangaliman, et al., (1941), it was ruled that the term doing business implies a continuity of commercial dealings, and contemplates, to that extent, the performance [by the foreign corporation] of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. This broad concept -- indicative that the economic contact by the foreign corporation would be continuous and permanent, not merely occasional or episodic -- has found its way into Section 3(d) of the Foreign Investments Act of 1991, which specifies continuous commercial dealings, along with certain other enumerated acts or activities, as constituting doing business in the Philippines. Thus: (a) Soliciting orders, [or] service contracts; (b) Opening of offices or branches; (c) Appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; (d) Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and (e) Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of functions normally incident to, and in progressive prosecution of, commercial gain or the purpose or object of the business organization. However, the following acts do not constitute doing business in the Philippines under the implementing rules of the Foreign Investments Act of 1991: (1) Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; (2) Having a nominee director or officer to represent its interest in such corporation; (3) Appointing a representative or distributor domiciled in the Philippines which transacts business in the representative s or distributor s own name and account; 90

95 Philippines (4) The publication of a general advertisement through any print or broadcast media; (5) Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines; (6) Consignment by a foreign entity of equipment with a local company to be used in the processing of products for export; (7) Collecting information in the Philippines; and (8) Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis, such as installing in the Philippines machinery it has manufactured or exported to the Philippines, servicing the same, training domestic workers to operate it, and similar incidental services. The Foreign Investments Act of 1991 and its implementing rules do not define what constitutes soliciting orders. In our opinion, however, the Manager would be engaged in solicitation if, within the Philippines, it provided existing or potential customers with the terms and conditions of the sale of units or interests in the Fund. Even if the Manager does not perform the acts mentioned in clauses (a) to (d) above, it could still be considered as doing business in the Philippines under the continuity test (as described in clause (e) above). However, the Supreme Court delimited this test in B. Van Zuiden Bros., Ltd. v. GTVL Manufacturing Industries, Inc. (2007), by ruling that: Actual transaction of business within the Philippine territory is an essential requisite for the Philippines to acquire jurisdiction over a foreign corporation and then require the foreign corporation to secure a Philippine business license, and even if there is a series of transactions implying a continuity of commercial dealings, the foreign corporation will not be doing business in the Philippines, if the perfection and consummation of these transactions were done outside the Philippines. This ruling was reiterated by the Supreme Court in Cargill, Inc. v. Intra Strata Assurance Corporation (2010). (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. The Manager is not prohibited from attending seminars, conferences and other relevant industry events in the Jurisdiction. This does not constitute doing business in the Jurisdiction and, therefore, the Manager will not be required to have a licensed presence in the Jurisdiction solely on account of that activity. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. The Manager is not prohibited from speaking at seminars, conferences and other relevant industry events in the Jurisdiction. This does not constitute doing business in the Jurisdiction and, therefore, the Manager will not be 91

96 Philippines required to have a licensed presence in the Jurisdiction solely on account of that activity. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? The Manager is not prohibited from sponsoring seminars, conferences and other relevant industry events in the Jurisdiction. This does not constitute doing business in the Jurisdiction and, therefore, the Manager will not be required to have a licensed presence in the Jurisdiction solely on account of that activity. It makes no difference if the Manager is the primary sponsor or only one of a number of sponsors. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Whilst in the Jurisdiction, the Manager can give all the documents and information described in (i) to (v) above to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction. This does not constitute doing business in the Jurisdiction and, therefore, the Manager will not be required to have a licensed presence in the Jurisdiction solely on account of that activity; provided that the Manager does not solicit orders from the recipients of those documents and information. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. From outside the Jurisdiction, the Manager can send all the documents and information described in (i) to (v) above. This offshore activity (even if it amounts to solicitation) is beyond the reach of the regulators of the Jurisdiction since its laws and regulations have no extraterritorial effect. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. 92

97 Philippines The Manager can invite (and pay for) people from the private sector in the Jurisdiction (i.e., those who are not officials or employees of the government of the Jurisdiction) to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. This does not constitute doing business in the Jurisdiction and, therefore, the Manager will not be required to have a licensed presence in the Jurisdiction solely on account of that activity. Inviting and paying for officials and employees of the government of the Jurisdiction might occasion a breach of the Code of Conduct and Ethical Standards for Public Officials and Employees (Republic Act No. 6713). (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. The Manager can invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. This offshore activity is beyond the reach of the regulators of the Jurisdiction since its laws and regulations have no extraterritorial effect. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. The term doing business is defined in Section 3(d) of the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended) as including soliciting orders. Cold calling might constitute such a solicitation, which could engender licensing issues for the Manager. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? General marketing activities that do not constitute soliciting orders in the Jurisdiction would be permissible. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? The Manager s marketing activities outside the Jurisdiction (even if these amount to solicitation) are outside the coverage of the doing business/licensing rules of the Jurisdiction. Laws and regulations of the Jurisdiction have no extraterritorial effect. 93

98 Philippines 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? The period of stay in the Jurisdiction of representatives of the Manager must not exceed 179 days in the aggregate in a calendar year, so that the Manager would not be deemed doing business in the Jurisdiction (Section 3(d), Foreign Investments Act of 1991). To avoid taxation on account of visits to the Jurisdiction, the aggregate period should not exceed 180 days during a calendar year (Section 25(A)(1), National Internal Revenue Code). 94

99 Philippines Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Investors in the Jurisdiction are permitted to appoint an offshore investment manager to manage a segregated mandate. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? There are no restrictions. Marketing activities of the Manager outside the Jurisdiction are beyond the regulatory reach of the Jurisdiction. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? The Manager can provide those details. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Without soliciting orders, the Manager can respond to such a request for proposal, whether private or public. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? The Manager can conduct the said meeting, provided that no solicitation of orders is made at that meeting. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? The Manager can attend such a beauty parade or finals presentation in the Jurisdiction. 95

100 Philippines 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? There is no such a requirement. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? The agreement can be governed by a law other than the laws of the Jurisdiction. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? None. 96

101 Philippines Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Investors in the Jurisdiction are permitted to invest in the Fund, if they are qualified buyers. Subsection 10.1(l) of the Securities Regulation Code ( SRC ) defines qualified buyers as including (i) a bank; (ii) a registered investment house; (iii) an insurance company; (iv) a pension fund or a retirement plan maintained by the government of the Philippines or any political subdivision thereof or managed by a bank or a trust entity; (v) an investment company; or (vi) such other persons as the Securities and Exchange Commission ( SEC ) may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management. Under SRC Rule , category (vi) may be a qualified individual buyer or a qualified institutional buyer. A qualified individual buyer is a natural person who, at the time of his or her registration with a registrar of qualified buyers, (a) has a minimum annual gross income of P10,000,000 for at least two years prior to such registration; or a total portfolio investment in securities registered with the SEC of at least P10,000,000; or a personal net worth of not less than P30,000,000, and (b) has been engaged in securities trading, in his or her personal capacity or through a fund manager, for a period of one year; or held for at least two years, in any professional or business entity, a position of responsibility that requires knowledge or expertise in securities trading (such as legal consultant, financial adviser, sales person or associated person of a brokerdealer, bank finance or treasury officer, trust officer or other similar executive officers). On the other hand, a qualified institutional buyer is a juridical person that, at the time of its registration with a registrar of qualified buyers, (a) has a minimum annual gross assets of at least P100,000,000; or (b) a total portfolio investment in securities registered with the SEC of at least P60,000,000. The Fund may also be sold to not more than 19 non-qualified buyers during a 12-month period (Subsection 10.1(k), SRC). If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. 97

102 Philippines (a) Sales to qualified buyers and to not more than 19 non-qualified buyers are exempt transactions and, therefore, the shares or interests in the Fund offered to those buyers need not be registered under the Securities Regulation Code. (b) The prospective investors may be qualified buyers and non-qualified buyers. (c) There is no limit as to the number of qualified buyers, but the number of non-qualified buyers should not exceed 19. (d) There is no minimum investment amount. (e) The following disclaimer should appear in offering documents and marketing materials in bold face, prominent type: THE SECURITIES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FUTURE OFFER OR SALE OF THE SECURITIES IS SUBJECT TO REGISTRATION REQUIREMENTS UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? The Fund need not be authorized or registered in the Jurisdiction in order for it to be offered in a non-public offering described above. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? There are no such restrictions. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? No. Marketing the Fund to prospective investors whilst the representatives are in the Jurisdiction could constitute solicitation of orders that would require the Fund or the Manager to have a licensed presence in the Jurisdiction. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? A local agent can be appointed to market the Fund. There are no special regulatory licenses or approvals required to be obtained by such a local agent. This agent must act on its name and account and not be under the control of the Fund or the Manager to avoid doing business/licensing issues 98

103 Philippines for the Fund or the Manager. However, the local agent itself has to be licensed to do business as such. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? The representative of the Fund or the Manager should not accompany the local agent to meet with prospective investors. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? The Manager can provide those details in response to such an unsolicited request. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? From outside the Jurisdiction, the Fund can accept such an unsolicited investment. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Without soliciting orders, the Manager can give information about the Fund in response to such a request for proposal, whether private or public. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? The Fund or the Manager can conduct the said meeting, provided no solicitation of orders is made at that meeting. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? The Manager can attend such a beauty parade or finals presentation in the Jurisdiction. 99

104 Philippines 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? There is no such requirement. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? The subscription agreement can be governed by a law other than the laws of the Jurisdiction. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? None. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? It does not make a difference. (b) the Fund was structured as a unit trust rather than as a company? It does not make a difference. (c) the Fund was structured as a limited partnership rather than as a company? It does not make a difference. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? It does not make a difference. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? It does not make a difference. 100

105 Philippines Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? There are no restrictions. It is advisable for the Manager to send the information from outside the Jurisdiction. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? This is arguably permissible, as long as no solicitation of new orders is made. 101

106 Philippines Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? It is the Securities and Exchange Commission of the Philippines. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? These are the Securities Regulation Code and the Corporation Code of the Philippines. 102

107 Singapore Questionnaire for the Republic of Singapore (the Jurisdiction ) Law Firm: Rajah & Tann LLP Website: Lawyer: Arnold Tan, Partner Telephone: (65) Date: 31 October arnold.tan@rajahtann.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 103

108 Singapore Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Yes, as long as in doing so the Manager is not holding itself out as carrying on business in a regulated activity or undertaking solicitation activities. Otherwise the Manager will be required to obtain the appropriate licence or exemption under the Securities and Futures Act (Chapter 289) ("SFA"). The SFA and the Financial Advisers Act (Chapter 110) ("FAA") seeks to regulate certain types of activities. These include the marketing of investment funds, the provision of investment management services and the provision of advice on securities. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. Yes, as long as in doing so the Manager is not holding itself out as carrying on business in a regulated activity. The Manager can speak on macro-economic issues such as economic and market trends and perspectives, as well as operational matters. The Manager should avoid providing financial advice or conducting solicitation activities. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? The act of sponsoring an event carries with it a raised risk that the Manager may be considered as holding itself out as carrying on business in a regulated activity. This is so regardless of whether the Manager is the primary sponsor of the event or just one of a number of sponsors. In such circumstances, the whole context of the situation will have to be looked at and the question of whether the Manager is considered to be holding itself out as carrying on business in a regulated activity will be judged on a case-by-case basis. Relevant considerations include the likely attendees at the event and the handouts given out at the event. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; 104

109 Singapore (iv) (v) the website address of the Manager; other information about the Manager and its services and products. Generally, the Manager can give out (i) business cards, (ii) general information about the Manager, or (iii) publication of the Manager that are educational in nature or general market commentary provided that such actions would not have the effect as holding itself out as carrying on a regulated activity. However, there is a raised risk that the Manager will be considered to be carrying on regulated activity or holding itself out as carrying on regulated activity if the Manager provides to the people that the Manager meets at seminar, conferences and other relevant industry events in Singapore (i) the website of the Manager or (ii) information about the Manager and its services and products. In such circumstances, the Manager may be considered to be marketing its funds or services. The risk is reduced where the provision of the website address or the information of the Manager and its services and products are provided to other financial intermediaries and not done with a view to solicitation of moneys, or was not pursuant to an unsolicited request. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Please refer to our response to Question 1(d) above. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Yes, provided that it does not amount to a bribe or payoff within the meaning of our Prevention of Corruption Act (Chapter 241). (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Yes, provided that it does not amount to a bribe or payoff within the meaning of our Prevention of Corruption Act (Chapter 241). 105

110 Singapore 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Yes, the SFA prohibits "cold calling". Section 309 of the SFA prescribes that no person shall make an offer to any person of securities for subscription or purchase, or an invitation to any person to subscribe for or purchase securities, in the course of, or arising from, an unsolicited meeting with that other person. However, this prohibition does not apply to solicitation activities in reliance on the exemptions for marketing to institutional investors and relevant persons described in our response to Question 2 of Part III below. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? In addition to the activities outlined in our response under Question 1(d), the Manager may conduct industry-related activities which are general in nature. Such general activities may involve the Manager giving a talk on industry outlook and trends and general investment strategies. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? In addition to the activities outlined in our response under Question 1(e), the Manager may conduct industry-related activities which are general in nature. Such general activities may involve the Manager providing comments or analysis on the outlook of the industry and any relevant industry developments. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? No restrictions on frequency of visits for general activities as such. However this should be considered in the context of the Manager's overall footprint in Singapore, including the frequency of visits undertaken by the same manager to visit an existing client or in its attendance at meetings where its funds are being marketed. The MAS may take into consideration the frequency of visits for general marketing activities in determining whether a manager should be deemed to conducting a business in fund management in Singapore. If it is deemed to be conducting such business, licensing requirements apply, and business profits arising from such activities will be taxed. 106

111 Singapore Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Yes. An investor in Singapore is allowed to appoint an offshore manager to manage a segregated mandate. However the SFA contains a number of extra territorial provisions, which includes the regulation of financial institutions whose activities have a substantial and reasonably foreseeable effect in Singapore. Consequently, an offshore manager not licensed in Singapore and who targets Singapore clients may run afoul of our licensing rules for investment managers. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Yes. See our response to Question 1 above. The MAS may deem such marketing activities to amount to the conduct of a fund management business in Singapore. Whether the manager can be said to be conducting a business in investment management in Singapore as a result of our extra territorial rules depends on the facts of the case, including the frequency of its marketing activities and the number of Singapore clients who engage the manager. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. The Manager is unlikely to be considered as carrying on or holding himself out to be carrying on regulated activity for the purposes of the SFA in such circumstances. However this should be read in the context of our response to Question 1 and 2 above. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes. It does not make a difference whether the request is private or public. However this should be read in the context of our response to Question 1 and 2 above. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? 107

112 Singapore Yes. As long as the Manager did not solicit investments from such investor in the first instance. However this should be read in the context of our response to Question 1 and 2 above. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Please see our response to Question 5 above. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? No. 108

113 Singapore Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Yes, subject to any express prohibition in their constitutive documents, investors in Singapore are allowed to invest in the Fund. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. Offering Regime and Prospectus Requirement The offering regime in Singapore allows marketing of offshore funds in Singapore, whether those funds are managed by Singapore managers or foreign managers. The marketing of the Fund in Singapore is governed by the SFA. Open-ended funds are defined under the SFA to be "collective investment schemes" ("CIS"). The SFA in Singapore generally prohibits any person from making an offer of interest in a CIS in Singapore unless a prospectus is first lodged with the Monetary Authority of Singapore ("MAS"). Typically, an open-ended equity or hedge fund would fall under the definition of a CIS under the SFA. Exemptions There are three exemptions to the prospectus requirements. The exemption will be available where the CIS is marketed (i) on a private placement basis (ii) only to institutional investors or (iii) as a foreign restricted scheme recognised by the SFA. Private Placement Exemption The prospectus requirements prescribed under the SFA do not apply to an offer that is made to no more than 50 persons in Singapore over a 12-month period. The aggregate 50 person rule will apply even where separate feeders are being marketed (i.e. 50 persons for all feeders), or where separate classes of shares for different sub-funds are being marketed (i.e. 50 persons for all subfunds). 109

114 Singapore In this regard, the rules relating to this exemption state that an offer to an entity or trust established primarily for the purpose of acquiring interests in the CIS will be treated as an offer to each of the underlying owners / beneficiaries of that entity or trust for the purpose of the 50 person limit. It is also important to note that any information memorandum issued should be numbered and addressed specifically to each offeree. Offers to Institutional Investors No prospectus requirement will apply if the CIS is offered only to institutional investors. Although there are no limits to the number of institutional investors to whom an offer can be made, this exemption is very limited and is only available to a restricted class of persons which would not include professional investors generally. Institutional investors are defined essentially to be Singapore financial institutions licensed by the MAS, and government agencies. Note that Temasek Holdings and Government of Singapore Investment Corporation are not institutional investors as defined. Foreign Restricted Scheme Recognised by SFA The prospectus requirement may not apply where the CIS is marketed solely to sophisticated investors. Exemptions are available where the offer is made only to (i) "relevant persons" (defined below) or (ii) persons who acquire units in the CIS as principal for a consideration of not less than S$200,000. Relevant Persons are defined to include: an accredited investor; a corporation the sole business of which is to hold investments and the entire share capital of which is owned by one or more shareholders, each of whom is an accredited investor; and a trustee of trust the sole purpose of which is to hold investment and each beneficiary of which is an individual who is an accredited investor. A notification will have to be lodged with the MAS in order for an offer to be made under the exemption. This notification is to be done online, via a platform known as CISNET. The MAS will then process the notification, and if there are no queries or objections raised by the MAS, the MAS will enter the CIS into its list of Restricted Schemes. The usual processing time from the time of submission of the notification (assuming there are no queries from the MAS) is about two to three business days. MAS only grants approval to managers who are licensed or regulated in their principle place of business. 110

115 Singapore General Requirement for Private Placement Exemption or Exemption under Foreign Restricted Scheme Generally to invoke the Private Placement or Foreign Restricted Scheme exemption under the SFA, offers should not be accompanied by any advertisement offering or calling attention to the offer or intended offer. The delivery of an information memorandum prepared for the review of prospective investors which purports to describe the securities being offered will not be considered as an advertisement under the SFA. However, such information memorandum should be numbered and addressed specifically to each offeree. Furthermore, no selling or promotional expenses should be paid or incurred with the offer in Singapore other than administrative or professional fees incurred or commissions or fees payable to persons with the appropriate licence or exemption under the SFA, Financial Advisers Act (Chapter 110), or in any other jurisdiction in dealing with securities or marketing of CIS. Any information memorandum issued should be numbered and addressed specifically to each offeree. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? After the Fund has been approved by the MAS as a Foreign Restricted Scheme the Manager will have the responsibility to ensure it continues to be licensed or regulated in its principal place of business and continues to be a fit and proper person as determined by the MAS in accordance to the criteria prescribed by the MAS. Furthermore, the Manager must ensure that disclosures made in relation to the Manager in the relevant application form submitted to the MAS for recognition as a restricted scheme does not change. Failure to comply with the ongoing obligations above may result in the recognition of the restricted scheme being revoked or an imposition of a fine. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Yes, the SFA has a number of extra-territorial provisions. The Manager must not do anything that would constitute marketing of the Fund to the public in Singapore. The Manager must ensure that marketing activity complies with the exemptions outlined in our response to Question 2 above. 111

116 Singapore 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? The marketing of a CIS is a regulated activity and the conduct of a business within Singapore of a regulated activity attracts licensing requirements. The Manager would require a Financial Adviser's licence or be exempt from holding such a licence under Singapore laws. Exemptions are not available to offshore managers. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? Yes. The local agent will be required to obtain a Financial Adviser's licence or be exempt from holding such a licence under Singapore laws. In practice, most fund distributors are banks who are able to market funds under such an exemption. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? Yes. However, the representative should only be allowed to give to the prospective investors general information about the Fund such as the investment strategy and objective of the Fund, the structure of the Fund and the background of the portfolio managers of the Fund. The representative should not make recommendations and advice, undertake solicitation activities and provide offering memorandums. These activities should only be conducted by the licensed or exempt local agent. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, as long as in doing so the Manager complies with the requirements under one of the exemptions outlined in our response to Question 2 above. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes, as long as the in doing so Manager complies with the requirements under one of the exemptions outlined in our response to Question 2 above. 112

117 Singapore 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes. This is so as long as the Manager complies with the requirements under one of the exemptions outlined in our response to Question 2 above, regardless of whether the request is a private or public request. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Yes, as long as in doing so, the Manager or its representative is accompanied by a licensed or exempt local agent. However the scope of information which the Manager or its representative can provide is limited to those outlined in our response to Question 7 above. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Yes, as long as in doing so, the Manager or its representative is accompanied by a licensed or exempt local agent. However the scope of information which the Manager or its representative can provide is limited to those outlined in our response to Question 7 above. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? If the Manager is relying on the exemption on the basis that the Fund is being marketed to relevant persons as stated in the response to Question 2, appropriate representations should be obtained in the Subscription Agreement. 113

118 Singapore 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. (b) the Fund was structured as a unit trust rather than as a company? No. (c) the Fund was structured as a limited partnership rather than as a company? No. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No. Previously, if the Fund was a closed-ended fund, marketing of the Fund solely to Relevant Persons as described in our response to Question 2 does not require the prior registration with MAS as a foreign restricted scheme. However, as a result of recent changes by the MAS, the registration requirement will be applicable to closed-end funds constituted on or after 1 July The position is unchanged as regards marketing in reliance on the Private Placement exemption and the Institutional Investor exemption. 114

119 Singapore Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? No. Provided that such information is restricted solely to information relating to the client's investment portfolio or investment in the Fund and does not constitute marketing for other investment funds or services. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes. Provided that the discussions relate only to the client s investment portfolio or investment in the Fund and the Manager does not market any other investment funds to the client in the course of the discussion. However, please also see our response to Question 1 and 2 of Part II above. 115

120 Singapore Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The Monetary Authority of Singapore is the regulator responsible for regulating the marketing of investment management services and the marketing of investment funds in Singapore. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The Securities and Futures Act (Chapter 289) and its related subsidiary regulations are the primary legislation governing the marketing of investment management services and the marketing of investment funds in Singapore. 116

121 Taiwan Questionnaire for Taiwan, the Republic of China (the Jurisdiction ) Law Firm: Tsar & Tsai Law Firm Website: Lawyer: Janice C.H. Lin (Partner) Abraham Cheng (Associate Partner) Telephone: Date: 31 October JaniceLin@tsartsai.com.tw AbrahamCheng@tsartsai.com.tw In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to any of the contacts listed. 117

122 Taiwan Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Without a license and presence to do business in Taiwan, the Manager is prohibited from engaging in any promotion or marketing activities relating to the Fund and/or the Manager s business in Taiwan. The penalties for violating the above prohibition includes, among others, criminal sentence. According to Taiwan laws, anyone who intends to offer or sell interests in securities or related products, including mutual fund (or collective investment scheme), or provide analysis, opinions, or recommendations on matters in relation to investment in or trading of securities, securities-related products, or other items approved by the Financial Supervisory Commission ( FSC ), shall apply with FSC for applicable license and/or authorization. If the Manager intends to offer or sell interests in a Fund to the public, it shall mandate a licensed local financial/securities firm (such as a local securities investment trust enterprises (SITE), securities investment consulting enterprises ( SICE ) or securities broker duly licensed by FSC) to act as its master agent to register the Fund with FSC and handle the offering, distribution and sale of the Fund in Taiwan. Also, a foreign company is not allowed to do business in Taiwan unless it is duly authorized and set up a branch in Taiwan as a foreign company doing business in Taiwan through its Taiwan branch. Violation of the above licensing requirement may involve criminal liability. There are no specific written laws to differentiate what types of cross-border marketing activities of a non-licensed foreign fund or manager are allowed or prohibited. If the Manager s attending of seminars, conferences or other relevant industry events in Taiwan is for the purpose of or may involve promoting the Manager s business or the Fund to the investors in Taiwan, such activities are prohibited. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. Same as our response in Q1.(a) above. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? Same as our response in Q1.(a) above. There is no difference if the Manager is the primary sponsor or only one of a number of sponsors. 118

123 Taiwan (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. For the general principle, please see our response in Q1.(a) above. The major concern is whether the above activities are for the purpose of or may involve promoting the Fund or the Manager s business. Also, without written laws or guidelines, the issue may not be determined solely on what information is provided, but also consideration may be given to the context of the event attended and how the Manager presents itself to the people in such event. If the Manager is invited to a seminar or event as an expert to speak generally on the global/regional financial/economic situation or market without commenting or mentioning its own business or products, or the Fund, and exchanges name cards with the attendees in such event, the Manager may have a justification that the above exchange is not for marketing purposes. If additional company information is provided, e.g. information listed in (d) (ii) to (v) above, the risk of violating Taiwan laws as mentioned in our response in the (a) above will be heightened. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. If the activities are for the purpose of or may involve the marketing of the Manager s business or the Fund to the investors in Taiwan, such activities are generally prohibited. There is no written safe harbour for sending marketing materials from outside Taiwan. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. The Manager shall refrain from this type of activity as it is highly likely to be viewed as promoting the business of the Manager, and be subject to the penalty of doing business in Taiwan without licence. 119

124 Taiwan (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. There is no clear written safe harbour for marketing activity conducted outside of Taiwan but targeting at or in relation to Taiwan investors. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. There is no specific rule governing cold calling by a non-licensed foreign investment management service provide, e.g. the Manager. The cold calling is not permitted under the prohibition mentioned in our response under Q1.(a). 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? No. Please see our response in Q1.(a) above. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? No. Please see our response in Q1.(a) above. There is no clear written safe harbour for marketing activity conducted outside of Taiwan but targeting at or in relation to Taiwan investors. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? As mentioned in our response under Q1.(a) above, the Manager is prohibited from engaging in any marketing activity (including through any representative or agent) in Taiwan. If the Manager does not engage in any marketing or business activity and has no Taiwan-sourced income, attending a conference should not trigger Taiwan income tax. In relation to the visa, it will depend on the visitor s nationality and purpose of visiting in Taiwan in order to determine which type of visa is required. 120

125 Taiwan Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Investors in Taiwan in general are allowed to make investments in a foreign jurisdiction, subject to certain exceptions or restrictions. For example, there are certain restrictions on the types or cap of foreign investments could be made by a Taiwan financial business, listed company or government invested entity. As a general principle, the investors in Taiwan may appoint an offshore investment manager to manage a segregated mandate, subject to the restrictions on its foreign investments. For example, according to the Taiwanese Insurance Act, there are investment cap and type restrictions on the offshore/foreign fund related products to be made by an insurance enterprise, and also restrictions on overall offshore investments made by the Insurance company. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? There are no clear written rules under Taiwan laws governing to what extent the marketing activity of the Manager can undertake outside the Jurisdiction in relation to prospective investors in Taiwan. As the securities, investment management, or related service is a highly regulated business (all required special license) in Taiwan, a foreign service provider trying to targeting the Taiwan investors from offshore may still be subject to Taiwan s jurisdiction and regulations. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? There are no written rules in Taiwan as mentioned in the above response under Q.2. If the Manager can provide proof that it is responding to the unsolicited requested from the Taiwan investors, this may lower the risk of violating said prohibitive laws. Nevertheless, there is no assurance whether the regulator in Taiwan will take the same position. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Same as our response in Q3 above. 121

126 Taiwan 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Same as our response in Q3 above. Without a written safe harbour for the unsolicited request, comparing to just sending information from outside Taiwan, having a physical meeting in Taiwan has a higher risk of being viewed by the Taiwan regulator as violating the licensing requirement that we mentioned above. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Same as our response in Q3 above. Without a written safe harbour for the unsolicited request, comparing to just sending information or communication from outside Taiwan, attending a physical meeting or presentation in Taiwan has a higher risk of being viewed by the Taiwan regulator as violating the licensing requirement that we mentioned above. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? As a general principle, there is no statutory requirement in this regard. In practice, this may also depend on whether the Taiwan counterparty is subject to the internal control or other compliance requirement, whereby a Chinese agreement is required or preferred. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? As a general principle, there is no statutory requirement in this regard, provided provisions in the agreements should not violate mandatory or prohibitive laws, of public order of Taiwan. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? This will depend on the restrictions imposed on the investors in Taiwan, and for local financial institutions, pension or mutual fund businesses, there are certain restrictions on mandating a foreign investment service provider. For example, according to the Taiwanese Insurance Act, there are investment caps and type restrictions on the foreign/offshore fund related products to be made by an insurance enterprise, and also restrictions on overall offshore investments made by the Insurance company. There are also regulations which require the insurance companies to specify certain clauses in the mandate agreement for engaging a discretionary investment advisor/manager for its offshore investment. 122

127 Taiwan Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Without obtaining from the FSC a prior approval and registration allowing the public offering and distribution of the Fund in Taiwan, or following the nonpublic offering (private placement) rules as mentioned in our response in Q2 below, the Fund is not allowed to be sold or offered to any investors in Taiwan. An offshore fund may carry out a private placement of the interests in the Fund, if the requirements of the private placement rules are met. Important requirements for the private placement include: 1) the Fund must meet the criteria as a qualified offshore fund under the applicable offshore fund regulations ( RGOF ) and FSC ruling; 2) the offerees must be limited to Qualified Offerees as described in Q2 below; and 3) no public announcement, advisement, or other promotional activities are conducted in relation to said offshore fund. For above 1), one of the criteria is the portfolio investment/assets of the Fund are limited to securities or securities related products (which are narrowly interpreted), otherwise, the private placement in Taiwan is not allowed. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. (a) The Fund is required to do a post-closing filing/registration with the FSC designated agency and the Taiwan Central Bank within five days after receiving full payment of the price for the privately placed interests/certificates. Without an effective registration, the Fund may be required to return the fund to the investors and be penalized for distribution in Taiwan without proper approval/registration, including criminal sentence for the responsible person(s). (b) The qualified offerees ( Qualified Offerees ) include: (i) Taiwan licensed financial institutes as stipulated in the offshore fund regulations or by the order of FSC ( Financial Institutional Investors ); and (ii) A total number in no excess of 35 individuals, entities or funds that meet the financial and expertise criteria prescribed and amended by the FSC from time to time ( Qualified Wealthy Investors ). 123

128 Taiwan The Fund should conduct due diligence and obtain proof of the qualifications of the offerees; (c) See above (b). (d) There is no statutory minimum investment requirement; and (e) Any privately-placed offshore funds are subject to transfer restrictions provided in the RGOF. Hence, the Fund is required to inform the Qualified Offerees of the nature of the private placement and any applicable transferring restrictions. Depending on the nature of the Fund, the disclaimer commonly used in the offering circular/memorandum is recommended (such as, no profit guarantee, possibility of losing invested principal, associated risks, no implied warranty, transfer limitation due to the non-public offering etc.). 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? (a) Designation of a local tax agent and a litigious agent. (b) Designation of a local placement agent. According to the RGOF, if the non-public offering of the Fund is only made to Financial Institutional Investors, it is optional for the Fund to appoint a local placement agent, which has to meet the qualification under FSC rules. But for Qualified Wealthy Investors, the Fund is required to appoint a qualified local placement agent, and any contact with the offerees shall be done through the placement agent. The local placement agent shall also comply with the conduct rules of the Securities Investment Trust and Consulting Association ( SITCA ), which include the risk disclosure and KYC assessment on the offerees, including (without limitation) the investment experience, profiles and suitable products. (c) Post-closing filing with FSC designated agency, i.e. SITCA; and (d) Update filing (monthly or per event) and notification to investors of change of the information of Fund filed with the Taiwan regulator and any material change or event in relation to the Fund. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Taiwan laws do not specifically differentiate the marketing activities undertaken within or outside Taiwan. The issue is whether the marketing activities may give rise to a public offering to investors in Taiwan. 124

129 Taiwan 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? There are no clear written rules in Taiwan in this regard. We suggest that if the offer may be made to Qualified Wealthy Investors, a local placement agent shall be appointed, and any visit or contact with the prospective investors shall be done through the local placement agent. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? The local appointed placement agent shall comply with the conduct rules prescribed by the local association, and any marketing activity by the local agent shall be limited to the Qualified Offerees, and shall refrain from any marketing activities which may arise to a public marketing or solicitation. The local appointed placement agent shall also comply with the conduct rules of SITCA, which include the risk disclosure and KYC assessment on the offerees, including (without limitation) the investment experience, profiles and suitable products. For conducting a non-public offering (private placement) according to the RGOF, the Fund may appoint a placement agent which is limited to Taiwan licensed bank, trust enterprise, securities broker, securities investment trust or consulting enterprise, provided that such private placement is only offered to the Financial Institutional Investors. On the other hand, if the Fund may be offered to the Qualified Wealthy Investors, the Fund is required to appoint a placement agent among the Taiwan licensed financial institutions mentioned above which meet additional qualification requirements, such as minimum paid-in capital. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? There is no written rule in this regard. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? For conducting a non-public offering (private placement) according to the RGOF, it is prudent to direct the prospective investor to the local placement agent. 125

130 Taiwan 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? For conducting a non-public offering (private placement) according to the RGOF, it is prudent to direct the prospective investor to the local placement agent. The Fund shall (through its placement agent) do due diligence to check if the prospective investor is a Qualified Offeree and follow the number of the offerees and other requirements of non-public offering as required under the RGOF before such acceptance. If the Fund does not intend to do a non-public offering according to the RGOF, the Fund is not allowed to accept an unsolicited investment from a prospective investor in the Jurisdiction. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? For conducting a non-public offering (private placement) according to the RGOF, it is prudent to direct the prospective investor to the local placement agent. If the Fund does not qualify or does not intend to do a non-public offering under the RGOF, the Fund is not allowed to respond such request, since the Fund is not allowed to be offered or distributed in Taiwan. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? For conducting a non-public offering (private placement) according to the RGOF, it is prudent to direct the prospective investor to the local placement agent. If the Fund does not qualify or does not intend to do a non-public offering according to the RGOF, the Fund is not allowed to respond such request, since the Fund is not allowed to be distributed in Taiwan. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Same as our response in Q11 above. 126

131 Taiwan 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. A Chinese translation may be required in the post-closing filing. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? For a non-public offering under the RGOF, the subscription agreement shall contain provisions regarding the investors qualification requirements, the acknowledgement of the investor on the receipt of the risk disclosure, financial and other related information regarding the Fund, and the applicable transfer restriction. The agreement between the Fund and the local placement agent shall include provisions as prescribed by the SITCA. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? There are no clear written laws in this regard. We think it should not make a difference, but FSC may have discretion on this issue as FSC tends to interpret the definition offshore fund narrowly for non-public offering. (b) the Fund was structured as a unit trust rather than as a company? No. (c) the Fund was structured as a limited partnership rather than as a company? Taiwan laws are not clear on this issue. The regulator may challenge the limited partnership as it is not a commonly used structure for collective schemes in Taiwan. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? 127

132 Taiwan This really depends on what the Fund, and the master fund are invested in. As mentioned in the above Q1, Part II, as a general principle, the investors in Taiwan may appoint an offshore investment manager to manage a segregated mandate, subject to the restrictions on its foreign investments. For example, according to the Taiwanese Insurance Act, there are investment cap and type restrictions on the foreign/offshore fund related products to be made by an insurance enterprise, and also restrictions on overall offshore investment made by the Insurance company. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? There are no clear written laws in this regard. We think it should not make a difference, but FSC may have discretion on this issue as FSC tends to interpret the definition offshore fund narrowly for non-public offering. 128

133 Taiwan Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? If the Fund meets the private placement qualifications as mentioned in above 1, and intends to do a non-public offering in Taiwan (i.e. no public promotional activities are conducted and will post completion filing), the Manager may do so. If the Fund is a non-registered foreign fund, the laws in Taiwan are not clear to what extend they may service their existing client. If the client is an unsolicited client the Fund should send the client a record of existing investments from outside Taiwan should be a more prudent approach. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? If the Fund has been duly registered as a private placed offshore fund, the Manager (accompanied by its local placement agent) may do so. If the Fund is a non-registered foreign fund, the laws in Taiwan are not clear to what extend they may service their existing client. If the client is an unsolicited client the Fund should send the client a record of existing investments from outside Taiwan should be a more prudent approach. The meeting in Taiwan shall be avoided since there is a potential risk of being viewed as doing business in Taiwan without license. 129

134 Taiwan Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Securities and Futures Bureau, Financial Supervisory Commission. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Securities Investment Trust and Consulting Business Act. Securities and Exchange Act. Regulations Governing Offshore Funds (RGOF). 130

135 Thailand Questionnaire for Thailand (the Jurisdiction ) Law Firm: Tilleke & Gibbins Website: Lawyer: David Duncan Telephone: Date: 31 October david.d@tilleke.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 131

136 Thailand Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. A natural person who is an employee of the Manager could attend seminars, conferences, and industry events of a like nature, subject to (assuming the employee is not a Thai citizen) visa and work permit requirements. Other requirements apply regardless of the employee s citizenship. Note that the employee s activities, such as talking with clients/potential clients and handing out business cards, at such seminars, conferences, and industry events of a like nature, would be subject to restrictions. Similarly, the content of the employee s discussions and distributed material(s), as well as other communications, in the context of such activities, would be subject to restrictions. In addition, depending on the employee s activities in Thailand on behalf of the Manager, it is possible that the Manager may require a Foreign Business License or Foreign Business Certificate, to authorize the Manager to engage in such business in the Jurisdiction, if such activities extended beyond the scope of those lines of securities business which are allowed as an exception under the Foreign Business Act. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. In addition to the requirements in Part I(1)(a), such person would also have to be a person licensed to undertake securities business, by a securities and exchange regulator which is a member of IOSCO. In the case of giving investment advice to retail investors, the advice must be given through a duly licensed Thai investment advisory company or brokerage company which has arranged the giving of such investment advice; or in case of giving investment advice to institutional investors, the advice must be specifically intended for institutional investors and, in case the subject is investment in structured notes, a document showing the worst case scenario of any investment therein, must be disclosed. The content must not offer or provide any other services related to securities ( securities business, as defined in the Securities and Exchange Act), or offer any securities (as defined in the Securities and Exchange Act). (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? Mere sponsorship (i.e. giving of money) of seminars, conferences, and industry events of a like nature, is not addressed in the regulations. Of greater concern would be the activities in which the Manager and/or the Manager s employees might engage in connection with such sponsorship, and/or the 132

137 Thailand materials, communications, and/or signage that may be distributed and/or otherwise publicized in connection with such sponsorship; these are areas where breach of the regulations would be likely. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. An employee of the Manager giving the above materials whilst attending seminars, conferences, and industry events of a like nature, would be subject to the same requirements as in Part I(1)(a), but there are restrictions with respect to the content of such materials. With respect to the materials, it is imperative to ensure that none would constitute an offer for any securities or related services. Moreover, the materials must not be used to directly or indirectly give advice concerning the value of securities, the suitability of making investment related to such securities, or the purchase or sale of any securities, unless the requirements mentioned in Part I(1)(b) are met, in which case advice can be given, provided it is not advice in response to any particular person s investment objectives, financial condition, and/or specific need, the advice is publicly disseminated, such that one who needs the information can acquire it easily and need not enroll as subscriber, the main objective of the advice must not be with respect to the value of particular securities or suitability of investing in those securities, or the purchase or sale of specific securities, and it must otherwise be in conformity with the SEC s rules and procedures. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Attendance at seminars, conferences, and industry events of a like nature would be subject to the requirements mentioned in Part I(1)(a). With respect to the materials, even when sent from outside the Jurisdiction, it is imperative to ensure that none would constitute an offer for any securities or related services. Moreover, the materials, even when sent from outside the Jurisdiction, must not be used to directly or indirectly give advice concerning the value of securities, the suitability of making investment related to such securities, or the purchase or sale of any securities, unless the requirements mentioned in Part I(1)(b) are met, in which case advice can be given, provided it is not advice in response to any particular person s investment objectives, 133

138 Thailand financial condition, and/or specific need, the advice is publicly disseminated, such that one who needs the information can acquire it easily and need not enroll as subscriber, the main objective of the advice must not be with respect to the value of particular securities or suitability of investing in those securities, or the purchase or sale of specific securities, and it must otherwise be in conformity with the SEC s rules and procedures. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Assuming an employee of the Manager were present in the Jurisdiction to invite people to the above events and attend such events, the requirements in Part I(1)(a) would be applicable. The content discussed at such events would be subject to the requirements in Part I(1)(b). (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. The requirements in Part I(1)(f) would be applicable, except that, of course, there would be no requirements to have Thai visas or work permits, in respect of activities undertaken outside the Jurisdiction. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Regulations require licensees to have policies in place such that cold calling will not present an annoyance to the recipients of the calls, and so that recipients of the calls are not pressured to make investment decisions. More specific requirements have developed in implementation of these principles. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? The Manager could undertake a range of other general marketing activities in the Jurisdiction, subject to the applicable requirements mentioned and/or referenced herein, being met. The Manager should take advice to determine the permissibility of each aspect of its specific marketing plans. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? The Manager could undertake a range of other general marketing activities outside the Jurisdiction, subject to the applicable requirements mentioned 134

139 Thailand and/or referenced herein, being met. The Manager should take advice to determine the permissibility of each aspect of its specific marketing plans. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? Pursuant to Thai domestic law, the Manager would be subject to corporate income tax in respect of income generated out of the Jurisdiction, if, inter alia, the Manager has an employee, representative, or go-between physically located in the Jurisdiction. Likewise, persons earning income from work performed in Thailand or a position held in Thailand would be subject to Thai personal income tax. Each of the foregoing tax positions may be modified by the terms of a double taxation avoidance agreement, if applicable. 135

140 Thailand Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Pursuant to regulations issued under the Exchange Control Act, mutual funds (but not private funds), securities companies, certain financial institutions, Thai juristic persons with assets of at least THB 5 billion, provident funds, insurance companies, the Social Security Fund, and the Government Pension Fund, are allowed to invest in foreign securities; such investment must not exceed applicable limits set by the relevant supervisory authority of the investor or set internally by the investor s directors or management (as the case may be). Other investors may invest in foreign securities through private funds or securities companies existing under Thai law, but must not exceed limits and other regulatory conditions imposed by the SEC. Investment via employee share schemes is handled separately; purchase of shares, warrants, and/or options issued by companies abroad which are related to the investor s Thai employer, are allowed up to USD 1 million per person per year. In cases where foreign investment is permitted by law, the investors could choose to engage offshore investment managers to manage such investments; the performance of such investment management services would be subject to other conditions and regulatory requirements. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Marketing activities undertaken by the Manager outside the Jurisdiction in relation to prospective investors in the Jurisdiction could only be conducted if such did not constitute an offer of securities or any other services relating to securities. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Whilst the Manager could provide certain details in response to an unsolicited request, review would be necessary to ensure that the details to be provided, and the method by which they would be provided, would not contravene applicable requirements. 136

141 Thailand 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Whilst the Manager could respond to a request for proposal, review would be necessary to ensure that the response to be provided, and the method by which it would be provided, would not contravene applicable requirements. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? The position would be the same as that described in Part I(1). 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? The position would be the same as that described in Part I(1). 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? Subject to some exceptions, the law does not require that agreements be made in a particular language. Among the exceptions, agreements with the state, including state enterprises, must be made in Thai. When agreements are to be enforced in Thai court, they will have to be translated into Thai, for the court. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Subject to some exceptions, the law does not require that Thai law be applicable to an agreement for foreign investment management services. Among the exceptions, agreements with the state, including state enterprises, must be governed by Thai law. Note also that even if a particular agreement provides for law other than Thai law to be applicable, certain provisions of Thai law may nonetheless apply, as a matter of public order and good morals. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? Numerous requirements apply to engagement of offshore investment advisors; these vary substantially, from investor to investor. In each case, the agreement must accommodate the applicable requirements. 137

142 Thailand Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. The position would be the same as described in Part II(1). If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. As a general matter, the Securities and Exchange Act provides that the offer for sale of securities to the public or any person/entity may be made only after a registration statement and a draft prospectus, which have been filed with the Office of the Securities and Exchange Commission (the Office ) have become effective, and must meet other regulatory requirements generally applicable to public offerings of securities (collectively General Public Offering Requirements ). The law provides an exception to these requirements in respect of the offer for sale of newly issued investment units offered by a securities company licensed to manage mutual funds, as the law sets out a separate process for securities companies licensed to manage mutual funds to apply for approval to establish individual mutual funds, and sets out separate requirements for on-going regulation thereof. However, on the basis that the Manager would not be licensed or registered in the Jurisdiction, the Manager would, as a practical matter, be unable to utilize such separate process or avail itself of the aforementioned exemption. Consistent with Thailand s commitments to the ASEAN Economic Community, the Securities and Exchange Commission has issued a notification to provide an exemption to the General Public Offering Requirements, in respect of units of certain foreign collective investment schemes ( CIS ) established in an ASEAN member country, the regulator in which is a member of IOSCO that is a signatory to MMoU Appendix A, provided the foreign CIS meets the requirements explained in Part III(3). 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? The Fund must be a foreign CIS established in an ASEAN country, which has been approved or registered by the Fund s home regulator. Requirements 138

143 Thailand differ whether the Fund would be offered for sale only to institutional or high net worth investors, or to general investors. For a Fund offered only to institutional or high-net-worth investors, the following requirements apply: 1. The CIS operator must: be under the supervision of its home regulator, and the home regulator must have the authority to impose sanctions and to order the CIS operator to take action or refrain from acting, in situations in which damage may be caused to the interests of investors; not have had its approval to conduct business suspended or revoked by its home regulator; and not have a record of violating laws or regulations under the responsibility of its home regulator, in matters relating to disclosure of material information to investors or its home regulator, or pertaining to the submission of such documents to investors or its home regulator. 2. The Fund must: have an investment policy that provides for similar assets and investment ratios as would be required for mutual funds established in Thailand with SEC approval (special requirements apply to feeder funds); be offered for sale in the jurisdiction of its home regulator and not be subject to an order banning such sale; have a brokerage firm acting as local representative responsible for selling, repurchasing, and redeeming units of the Fund in Thailand; and have a local representative, being a securities company or representative office in Thailand (pursuant to Section 93 of the Securities and Exchange Act), to coordinate the following matters in Thailand: - disclosing and sending information on the Fund, as required by law under the responsibility of the home regulator, to investors, and any other information related to the Fund, which the manager intends to disclose to investors; and - receiving notices, orders, summons, and/or any other documents on behalf of the Fund or the CIS operator. For a Fund offered to general investors, the Fund must: be subject to supervision by its home regulator, which shall have jointly signed with the Office, the Memorandum of Understanding on Streamlined Authorisation Framework for Cross-Border Public Offers of ASEAN Collective Investment Schemes (the Memorandum ); be in conformity with Parts I and II of Appendix C to the Memorandum, which sets out standards for qualifying Funds; offer its units for sale in the jurisdiction of the home regulator and not be under an order banning such sale; assign a brokerage firm to act as a local representative responsible for selling, repurchasing, and redeeming units of the Fund in Thailand; and having a local representative being a securities company or representative office in Thailand (pursuant to Section 93 of the Securities and Exchange Act), in order to coordinate and facilitate the following matters in Thailand: - disclosing and sending information on the Fund, as required by law under the responsibility of the home regulator, to investors, and any 139

144 Thailand other information related to the Fund, which the manager intends to disclose to investors; - receiving notices, orders, summons, and/or any other documents on behalf of the Fund or the CIS operator; - Verifying the establishment of the Fund (its constitutive documents); - Contacting the Fund registrar on behalf of unit holders in Thailand; - Providing a dispute resolution mechanism other than court, unless the Fund has specified that it will comply with the ASEAN capital markets Dispute Resolution and Enforcement Mechanism ( DREM ); and - Disclosing material information as would be disclosed to unit holders of mutual funds established in Thailand with SEC approval. For both categories of Fund, there is a regulatory examination process mandated by the Thai Capital Markets Supervisory Board, which must be completed before the Fund can lawfully be offered in Thailand. Approved foreign CIS are to be listed on the website of the Office. As a general matter, Thai securities companies are prohibited from providing trading service for units of foreign CIS that are not listed on the website of the Office. Other regulatory requirements also apply, both for initial approval and on an ongoing basis. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? The position would be the same as in our response to Part II(2). 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? The positions in Part I(1) would be applicable. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? See Part III(3). In providing trading service for units of the Fund, the Thai securities company (appointed as described in Part III(3) above) must comply with the requirements as specified in the Notification of the Capital Markets Supervisory Board, concerning rules for giving investment advice and providing service related to trading of investment units, mutatis mutandis, except where specified otherwise in the relevant regulations of the Capital Markets Supervisory Board which are specific to foreign CIS. 140

145 Thailand 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? The position would be the same as in Part III(5). 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? The Manager could provide certain details about the Fund within the Jurisdiction, but review would be necessary to avoid the Manager finding itself in a position of engaging in the securities business of mutual fund management, without the necessary regulatory approvals. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? On the basis that the Fund is outside Thailand and has no presence in Thailand, Thai law would not address whether the Fund could accept the investment. However, the investor may be under restrictions or conditions which the investment may contravene. As a practical matter, it is sometimes the case that assets are held in accounts outside the Jurisdiction, without having received the necessary approvals; such is contrary to law. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? The position would be the same as in Part III(8). 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? The position would be the same as in Part III(5). 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? The position would be the same as in Part III(5). 141

146 Thailand 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? The position would be the same as in Part II(7)(a). (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? The position would be the same as in Part II(7)(b). (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? The position would be the same as in Part II(7)(c). 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? There would be no difference. (b) the Fund was structured as a unit trust rather than as a company? There would be no difference. (c) the Fund was structured as a limited partnership rather than as a company? There would be no difference. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? There would be no difference. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? There would be no difference. 142

147 Thailand Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? For an offshore investment made otherwise lawfully, information on the client s investment portfolio or investment in the Fund should be provided according to the terms of the agreement between the Manager and the client; similarly, in the case of a foreign CIS approved as described in Part III(3) above, there are regulatory obligations with respect to provision of information, which must be met. In circumstances other than the foregoing, i.e. with respect to investments which are not lawful, such information could serve as evidence of illegal investment or other breach of law. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? For an offshore investment made otherwise lawfully, an employee of the Manager could meet with an existing client in the Jurisdiction, provided the requirements in Part I(1) were met. 143

148 Thailand Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The primary regulator is the Securities and Exchange Commission, but the Ministry of Finance also plays an important role. Additionally, the Bank of Thailand regulates in certain areas that have relevance to investment, e.g. exchange control, as mentioned above. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The primary law on the marketing of investment management services and investment funds in the Jurisdiction is the Securities and Exchange Act B.E (as amended). Note that derivatives are addressed under a separate law - the Derivatives Act B.E (as amended) - which establishes a separate though similar regulatory regime applicable to derivatives, derivative funds, and services pertaining thereto. There are numerous regulations promulgated under both the Securities and Exchange Act and the Derivatives Act. 144

149 Australia Questionnaire for Australia (the Jurisdiction ) Law Firm: Minter Ellison Website: Lawyer: Stuart Johnson Telephone: Date: 31 October stuart.johnson@minterellison.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 145

150 Australia Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Attending seminars, conferences and other relevant industry events is permitted and there is generally no restriction on such activity. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. There is generally no restriction on speaking at seminars, conferences and other relevant industry events provided that the speaker does not provide financial product advice (unless the speaker, or the organisation that he or she is speaking on behalf of, can rely on an exemption under Australian law). Providing financial product advice is broadly defined as a recommendation or statement of opinion (or a report of a recommendation or statement of opinion) that is intended to influence a person in making a decision in relation to a particular financial product or class of financial product, or could reasonably be regarded as having such an influence. For these purposes, an interest in a Fund would be a financial product and investments of the Fund may also be financial products (depending on the type of investments). (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? There is generally no restriction on sponsoring seminars, conferences and other relevant industry events. However, if the Manager engages in conduct that is intended, or is likely, to induce people to use financial services it provides during those events and if the Manager's conduct extends beyond providing factual information, then the Manager needs to either hold an Australian financial services licence (AFSL) or be eligible for an AFSL exemption. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. 146

151 Australia The Manager will need to hold an AFSL if it carries on a financial services business in Australia. The definition of carrying on a financial services business in Australia is broad and includes engaging in conduct that is intended to induce people to use the financial services provided by the Manager or conduct which is likely to have such effect. For example, general information about the Manager itself that only relates to its brand but not any of the services or products it provides may not involve a recommendation or a statement of opinion that could induce a person to use a financial service. However, if this general information is presented in a manner that may reasonably be regarded as suggesting or implying a recommendation to buy, sell or hold a particular financial product offered by the Manager, this could be classified as a financial service. As such, we consider that most of the above activities could be regarded as being likely to have the effect of inducing people in Australia to use financial services that are provided by the Manager. Therefore the Manager needs to either obtain an AFSL or rely on an AFSL exemption. It is unlikely that the Manager will be able to provide any financial services to retail clients if it does not hold an AFSL. However, there are some exemptions that may cover the Manager's dealings with wholesale clients (investors who are not retail clients). Please refer to our response to question 2(b) of Part III for the meaning of the term wholesale client. There is an exemption from the requirement to hold an AFSL which modifies the extra-territoriality reach of the Australian licensing laws such that if the Manager limits its dealings with people in Australia to persons who are wholesale clients and has only a limited connection with Australia (such as a one-off visit from overseas) (Inducing Only Exemption). However, if the Manager actively solicits clients in Australia and is making regular visits, then it may cease to be eligible for the Inducing Only Exemption. The Manager should also be cognisant of guidelines imposed by the Australian Securities and Investments Commission (ASIC) that prescribe the manner by which financial service providers can promote their financial products (e.g. interests in a Fund). At a very high level, to comply with the guidelines, the Manager should ensure that any promotional material distributed in Australia is balanced and not misleading. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. 147

152 Australia Even if the Manager is outside Australia, they may still be engaging in conduct that is intended (or likely) to induce people in Australia to use the financial services they provide. Therefore our response to (d) is applicable. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. If the Manager is intending to induce the relevant people in Australia to use financial services they provide (e.g. invest in Funds operated by the Manager), then they might still be regarded as carrying on a financial services business in Australia. If the Manager does not have an inducing intention, then these activities would be less likely to be considered to have an inducing effect, compared against those described in (d). To the extent that the Manager has an inducing intention, then our response to (d) is applicable. If the Manager does not have an inducing intention, then it is unlikely to trigger any licensing requirement. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. If the event occurs outside Australia, then Australian laws will not apply to the event. To the extent that the Manager has an inducing intention, then our response to (d) is applicable. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Yes. However, these restrictions apply to dealings with retail clients and will therefore not be relevant to the Manager if the Manager is only seeking to make contact with wholesale clients (see our response to question 2 of Part III for details of the wholesale client definition). 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? If the marketing activities are such that the Manager is engaging in conduct that is intended or is likely to induce people in Australia to use or acquire its financial products or services, then the Manager may be carrying on a 148

153 Australia financial services business in Australia but will not need an AFSL if it can rely on the Inducing Only Exemption, referred to in our response to 1.(d). 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? Please refer to our responses to 1.(d) and (e). 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? The Inducing Only Exemption applies if the Manager is only carrying on a financial services business in Australia because of the inducing behaviour (i.e. it does not carry on business in Australia). If there is system, repetition and continuity in the Manager's Australian activities, it is likely to be carrying on business in Australia. If representatives are coming into Australia on a regular basis, then this could amount to the Manager carrying on business in Australia, which could trigger: an obligation for the Manager to hold an AFSL; an obligation for the Manager to register with ASIC as a foreign company; and a permanent establishment for the Manager in Australia for the purposes of income tax law. Another key indicia of carrying on business in Australia is where representatives are able to enter into contracts binding on the Manager from within Australia. We therefore recommend that the Manager's representatives do not negotiate or sign any agreements while they are visiting Australia. We note that the Inducing Only Exemption is narrow and can only be relied on for one-off ad hoc dealings with wholesale clients and should be assessed on a case by case basis. 149

154 Australia Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Yes. If the Manager provides financial services to a person (who is an Australian citizen or resident in Australia) in Australia from outside Australia (who has not been solicited by the Manager) and the Manager is not engaging in any conduct that is intended, or likely, to induce people in Australia to use the financial services it provides, then the Manager is exempt from the requirement to hold an AFSL (No Inducing Exemption). However, due to the inducing restriction, this exemption is unavailable if the Manager is actively targeting Australian business (either in Australia or from outside Australia). Other exemptions could be applicable if the client is a wholesale client. Please refer to our response to question 1.(d) of Part I for a description of the Inducing Only Exemption and the circumstances in which it applies. If the Inducing Only Exemption is not available then the Manager may be able to take advantage of ASIC class order relief for financial service providers regulated in foreign jurisdictions under a regulatory regime that ASIC considers to be sufficiently equivalent to the Australian regulatory regime who only provide financial services to wholesale clients in Australia. Currently class order relief is available for service providers regulated by (as applicable): the Prudential Regulation Authority of the United Kingdom and Financial Conduct Authority in the United Kingdom ; the Securities and Exchange Commission, the Federal Reserve, the Comptroller of the Currency or the Commodity Futures Trading Commission in the United States; the Monetary Authority of Singapore; the Securities and Futures Commission in Hong Kong; or the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in Germany (FFSP Class Orders). This class order relief is subject to a number of conditions and there are certain documents which must be executed and provided to ASIC. Managers who fit within any of the above categories should contact Australian counsel for more detailed information. If the client is the trustee of a superannuation fund (other than a self-managed superannuation fund as defined under the Australian law), then the investment manager appointed by the trustee must be a body corporate. If the answer to the above question is no, please go to Part III. 150

155 Australia 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? The Manager should: comply with the restrictions of any AFSL exemption on which it relies; ensure that its marketing activities are not directed at retail clients (e.g. use disclaimers in written materials); and the content of written materials and presentations is not misleading or deceptive. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, subject to the Manager not providing any financial product advice to the prospective investor or otherwise ensuring that it has the benefit of an AFSL exemption. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? If the response does not contain any financial product advice and is limited to factual information, then this will not trigger the licensing requirements. However, it is important to consider what licensing obligations the Manager would have if the request for proposal was accepted by the investor. If the request for proposal is sent directly to the Manager, then the No Inducing Exemption may apply. If the Manager responds to an open request for proposal, its conduct is more likely to involve inducing. If the prospective investor is a wholesale client then the Inducing Only Exemption may apply (depending on whether the Manager is otherwise carrying on business in Australia) if the prospective investor is a wholesale client (see our response to question 2 of Part III for the definition of wholesale client). 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? If the Manager meets with a prospective investor in Australia then it is likely to be engaging in conduct intended or likely to induce the prospective investor to use the Manager's financial services. The Manager can meet with the prospective investor. If discussions with the investor are limited to factual information and do not constitute financial product advice, then the meeting itself will not trigger any licensing obligation. 151

156 Australia If, as a result of the meeting, the Manager wishes to proceed to provide financial services to the investor, the Manager must ensure that the investor is a wholesale client and either obtain an AFSL or ensure that it can rely on an exemption such as the Inducing Only Exemption or an FFSP Class Order. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Yes. The regulatory consequences of the manager's attendance are the same as outlined in our response to If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. However, applicable Australian laws prohibiting misleading and deceptive conduct would still apply. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? If the Manager is relying on an exemption under which it may only service wholesale clients, then the agreement should include warranties that the investor is a wholesale client (see our response to question 2 of Part III for the definition of wholesale client). In addition, it may be prudent to have the investor acknowledge certain matters about the Manager's reliance on the licensing exemption. If Australian privacy and anti-money laundering requirements apply to the Manager, then the agreement should address the Manager's obligations under those laws. The Manager should have the agreement reviewed by Australian counsel for these purposes. 152

157 Australia Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. This largely will depend on where the offer is made. If it is made to a person who is in Australia at the time the offer is made, the Manager would have to fall under a relevant AFSL exemption and the offer can only be made to wholesale (as opposed to retail) clients. Please refer to our response to 2 for an explanation of what a wholesale client is. If the offer is not made in Australia and the Fund is not domiciled in Australia, then the offer will not be impacted by Australian laws. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. (a) If the Fund is only offered to wholesale clients in Australia, there is no requirement to prepare an Australian prospectus or a Product Disclosure Statement and the Fund need not be authorised or registered however the Manager may be required to hold an AFSL or rely on an AFSL exemption. (b) The Manager should only approach wholesale clients. In summary, an investor seeking to invest in a Fund is a wholesale client if they fit within any of the following categories: the price of the product or the value of the product to which the service relates equals or exceeds A$500,000; the product or service is provided for use in connection with a business that is not a small business (a small business means a business with less than twenty employees, or if it is a manufacturing business, less than one hundred employees); the investor is acquiring the product personally (rather than for use in connection with a business) and can provide a certificate from a qualified accountant (given the preceding two years) that they have net assets of at least A$2.5 million, or have had gross income for each of the last two financial years, of not less than A$250,000 per annum; or 153

158 Australia the investor is a 'professional investor' for example: - the investor is itself a financial services licensee, that is, it holds an AFSL; - the investor is a trustee of a superannuation fund with net assets of at least A$10 million; - the investor is a listed entity or a related body corporate of a listed entity; - the investor is an exempt public authority; - the investor is a body regulated by the Australian Prudential Regulation Authority, such as a life company or a bank; - the investor is a body which invests funds raised by public offer (such as an investment company); - the investor has or controls at least A$10 million (including any amount held by an associate or under a trust that the person manages); or - the investor is a foreign entity that, if established or incorporated in Australia, would fall within one of the above categories. Note that: the trustee of a superannuation fund (and so the fund itself) will not be a professional investor unless the fund has net assets of at least A$10 million; and a related body corporate of a wholesale client can also be treated as a wholesale client. If an investor does not fit within any of the above categories then they are a retail client. (c) There is no limit on the number of offers that the Manager can make to wholesale clients in Australia (provided the Manager holds an AFSL or relies on an AFSL exemption). There is a prospectus and Product Disclosure Statement exemption that allows an offer to be made without a prospectus to retail clients if in any 12 month period no more than 20 retail clients invest and no more than A$2 million is raised from retail clients. However, we would not recommend that the Manager approach retail clients because generally the relevant AFSL exemptions would not allow for this. (d) There is no regulatory restriction that imposes a minimum investment amount. However, the Manager needs to be satisfied that an investor is a wholesale client. One way for an investor to satisfy the wholesale client definition is where they invest at least A$500,000 in a Fund. (e) It is important that the offer is only made to wholesale clients so at the very least there should be disclaimer language to this effect in the offering memorandum provided to investors. If the Manager is relying on an FFSP Class Order there is specific disclosure that it must make when it provides financial services in Australia. The Manager should engage Australian counsel to draft appropriate disclaimers for the relevant document in the relevant circumstances. 154

159 Australia 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? As we have explained, no prospectus or Product Disclosure Statement will be required to be lodged with ASIC for the Fund if the offering of the Fund in Australia is restricted to wholesale clients. If the Manager is relying on an AFSL exemption that only covers dealings with wholesale clients, they will need to ensure that they only deal with wholesale clients in Australia. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? If the Manager is relying on an AFSL exemption, then the Manager must ensure that the marketing activities are conducted consistently with the terms of the exemption. For example, if the exemption is only applicable to the provision of financial services to wholesale clients, then the marketing activities should only be directed at wholesale clients. In addition, the content of written materials and presentations must not be misleading or deceptive. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? Yes. Please have regard to our comments in response to 4 above. We also note that the number of visits made to Australia and the amount of time spent in Australia by representatives will impact upon whether the Manager is carrying on business in Australia. Please refer to our response to question 5 in Part I. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? Yes, the Manager may commission representatives in Australia to market the Funds. The agent would ordinarily need to hold an AFSL or be appointed as the authorised representative of an AFSL holder. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? 155

160 Australia Representatives of the Fund or Manager may accompany the local agent to meetings with prospective investors. If the Fund and/or Manager do not hold an AFSL or have the benefit of an AFSL exemption, then the local agent must provide and take responsibility for the provision of any financial services. We also note that the number of visits made to Australia and the amount of time spent in Australia by representatives will impact upon whether the Manager is carrying on business in Australia. Please refer to our response to question 5 in Part I. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, subject to the comments below. If the Manager was not engaging in any other activities in Australia and the request was sent from Australia to the Manager outside Australia, then the No Inducing Exemption may apply. If the No Inducing Exemption does not apply, then the Manager must either: ensure that it provides only factual information and no financial product advice; or ensure that it has the benefit of an AFSL exemption (e.g. the Inducing Only Exemption, an FFSP Class Order or certain other exemptions for unsolicited requests from prospective investors). 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes, subject to the comments below. If the Manager was not engaging in any other activities in Australia and the request was sent from Australia to the Manager outside Australia, then the No Inducing Exemption may apply. If the No Inducing Exemption does not apply, then the Manager must ensure that it has the benefit of an AFSL exemption (e.g. the Inducing Only Exemption or an FFSP Class Order). 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Please refer to our response to question 4 of Part II. The analysis is the same irrespective of whether the "request for proposal" relates to investment services or a Fund. 156

161 Australia 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Please refer to our response to question 5 of Part II. The analysis is the same irrespective of whether the discussion relates to investment services or a Fund. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Please refer to our response to question 6 of Part II. The analysis is the same irrespective of whether the discussion relates to investment services or a Fund. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? Please refer to our response to question 7(c) of Part II. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. (b) the Fund was structured as a unit trust rather than as a company? Not in a material respect. If the Fund is structured as a unit trust, then this triggers an additional regulatory issue as to whether the trust needs to be registered with ASIC as a managed investment scheme. However, if the only investors in the trust in 157

162 Australia Australia are wholesale clients, then the trust will not need to be registered. The other difference is that if the Fund is a unit trust, then the product issuer would be the trustee of the Fund rather than the Fund itself. If the Manager itself is the trustee, then there may be some additional AFSL exemptions available that apply only to product issuers. (c) the Fund was structured as a limited partnership rather than as a company? If the limited partnership is a body corporate for the purposes of Australian law, no. If the limited partner is not a body corporate for the purposes of Australian law, it may be a managed investment scheme and our comments in response to (b) above would similarly apply. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No. 158

163 Australia Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? There are no restrictions on the Manager sending factual information that does not contain any financial product advice (e.g. investment records, distribution statements). If the Manager is sending the client anything that constitutes financial product advice, they will either need to hold an AFSL or ensure that they have the benefit of an exemption. There is an AFSL exemption for providing financial services to existing clients relating to a financial product they already hold, but it only applies to the issuer of the Product (which would be the Fund, not the Manager). 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes, provided that either: the Manager does not provide any financial services in the meeting (i.e. provides factual information only and no financial product advice); or if the Manager provides financial services, it either holds an AFSL or has an AFSL exemption (and provides the financial services in accordance with the requirements of the exemption). The extent to which the Manager comes to Australia to visit existing clients will impact upon whether it is carrying on business in Australia. Please refer to our response to question 5 in Part I. 159

164 Australia Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Australian Securities and Investments Commission (ASIC). 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Corporations Act 2001 (Cth) Corporations Regulations 2001 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) 160

165 England, Scotland and Wales Questionnaire for England, Scotland and Wales (the Jurisdiction ) Law Firm: Maclay Murray & Spens LLP Website: Lawyer: David Young (Edinburgh/London) Lucia Avignone Telephone: +44 (0) Date: 31 October david.young@mms.co.uk lucia.avignone@mms.co.uk In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. AIFMD means The Alternative Investment Fund Managers Directive 2011/61/EU. Regulations means The Alternative Investment Fund Managers Regulations 2013/1773, which transposed the AIFMD into UK law on 22 July AIF means an Alternative Investment Fund within the meaning of the AIFMD. Please note that the Directive on Markets in Financial Instruments 2014/65/EU (MiFID II) and Regulation (EU) No 600/2014 (MiFIR) entered into force on 2 July 2014, and must generally apply across the European Union from 3 January The domestic deadline for the UK Financial Conduct Authority to transpose MiFID II into domestic laws and regulations is 3 July Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to any of the contacts listed above. 161

166 England, Scotland and Wales Part I General Cross-Border Marketing Activities Note: Please be aware that Scotland and England & Wales are separate legal jurisdictions and whilst financial services and tax law is broadly identical, there are differences in common law in a number of areas including, without limitation, partnership law and trust law. 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. General attendance at any of these events is permitted. There is no general restriction under Scottish or English law which would preclude the Manager from attending subject to any specific restrictions which may be imposed by the industry event itself. For example, it may be that the seminar or conference provider places restrictions on attendance at a particular seminar, conference or event, limiting it to advisers or to those who are, in effect, qualified, professional or high net worth investors. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. There is no general restriction on speaking at seminars, conferences or at other relevant industry events within the Jurisdiction provided that the content of the material to be presented in the speech, seminar or conference does not: (a) constitute a financial promotion ; (b) contravene any common law or statutory regimes regarding negligent misstatement or misrepresentation; or (c) constitute marketing an AIF. Financial Promotions A financial promotion is any communication in the course of business capable of having an effect in the UK that meets the definition of an invitation or inducement to engage in investment activity. The acquisition or disposal of interests in a fund constitutes investment activity. There is detailed guidance from the UK Financial Conduct Authority ( FCA") on the definitions of invitation and inducement, and both are defined broadly. The test as to whether a communication is an invitation or inducement is an objective one; whether a reasonable observer, taking account of the circumstances in which the communication was made, would regard or consider the communication to be one which sought to persuade or incite the recipient to engage in investment activity or was intended by the communicator to have this effect. If the speaker at the seminar/conference is to present material that could in any way be construed as having a marketing or promotional element to it, specialist advice should be sought prior to making the presentation. Section 21 of the Financial Services and Markets Act 2000, as amended 162

167 England, Scotland and Wales ( FSMA ) makes it unlawful for any person to communicate in the course of business a financial promotion capable of having an effect in the UK, unless (a) that person is an authorised person (i.e. authorised to conduct business by the FCA and/or the Prudential Regulatory Authority (the PRA )); (b) the financial promotion is approved by an authorised person ; or (c) the financial promotion in question is able to fall within one of the exemptions from Section 21 FSMA as set out in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the FPO ). The Section 21 FSMA restriction is herein referred to as the financial promotion restriction. Some exemptions from the financial promotion restriction are discussed in more detail below. Negligent misstatement, misrepresentation etc. It should also be noted that as with most jurisdictions, both Scotland and England & Wales have common law relating to defamation, negligent misstatement and misrepresentation etc. In addition, Part 7 of the Financial Services Act 2012 (sections 89 and 90) includes a statutory regime for misleading statements and misleading impressions. Section 89 (Misleading statements) makes it a criminal offence to knowingly or recklessly make a false, deceptive or misleading statement for the purpose of inducing (or being reckless as to whether it may induce) another person to enter into an agreement (or refrain from entering into an agreement) or refrain from exercising rights under an agreement. Section 90 (Misleading impressions) makes it a criminal offence to act or engage in any course of conduct which creates a false or misleading impression as to the market in or the price or value of any relevant investments where the person intends to create the impression and intends, by creating the impression, to induce another person to acquire, dispose of, subscribe for or underwrite the investments or to refrain from doing so or to exercise or refrain from exercising any rights conferred by the investments. Sanctions under Section 92 include imprisonment and/or a fine. Care should be taken to ensure that all presentation materials and statements are factually accurate and not misleading. Marketing an AIF The AIFMD, an EU-wide piece of legislation, has been implemented across the EU (by the Regulations in the United Kingdom) since 22 nd July The AIFMD imposes requirements on an Alternative Investment Fund Manager or an investment firm marketing AIFs to investors in the EU (and by extension, the UK). The definition of an AIF is quite broad, and captures inter alia private equity funds, hedge funds and real estate funds. Marketing is defined as a direct or indirect offering or placement at the initiative of the AIFM (defined below) or on behalf of the AIFM of units or shares in an AIF it manages to or with investors domiciled or with a registered office in the EU. Guidance at 8.37 of the Perimeter Guidance Manual ( PERG ) of the FCA Handbook of Rules and Guidance (available on the FCA 163

168 England, Scotland and Wales website) has been published by the FCA explaining how it interprets this definition, and drawing distinctions between this regime and the existing financial promotions regime in the UK (where relevant). The guidance suggests that the AIFMD concept of marketing is narrower than the financial promotion regime (which continues to apply). For example, the FCA s view is that passive marketing (i.e. marketing which is not at the initiative of the AIFM), is permitted by the AIFMD, but such marketing must continue to comply with the financial promotion rules. The marketing rules under the AIFMD are complex, and how they work depends on a number of factors. For example, whether the AIF is based in the EU or a third country, and similarly whether the investment manager of the AIF (the AIFM ) is based in the EU or a third country. One of the key concepts under the AIFMD is the passport, enabling AIFMs to conduct marketing activities for AIFs throughout the EU, rather than having to rely on the private placement regimes in each individual Member State in which the AIFM wishes to market. Obtaining a passport under the AIFMD requires the AIFM to comply with the various requirements of the AIFMD, or satisfy certain equivalence provisions (i.e. the third country in which the AIFM is domiciled must have rules which are equivalent to the AIFMD, and the third country regulator must have a co-operation agreement in place with the relevant EU regulator in the AIFMs Member State of reference ). Currently, non-eu AIFMs wishing to market AIFs in the UK are required to comply with the private placement regimes as well as the financial promotion rules. Although the AIFMD does envisage the possibility for non-eu AIFMs continuing to rely on national private placement regimes post-implementation (i.e. marketing without a passport) until at least 22 July 2018, it is currently unclear to what extent existing private placements regimes will remain postimplementation of the AIFMD. In the UK, HM Treasury has confirmed that existing private placement regimes in the UK will be maintained, subject to the non-eu AIFM complying with certain AIFMD requirements (e.g. rules on transparency). There is also a notification requirement to the FCA, who will keep a register of non-eu AIFMs marketing in the UK. With respect to marketing to retail investors, the AIFMD does envisage this (subject to complying with certain provisions of the AIFMD); however, the AIFMD also permits Member States to impose additional requirements for such marketing beyond those contained in the AIFMD. There is no passport for marketing to retail investors. In the UK, the FCA has indicated that the financial promotion regime should work alongside the AIFMD, and accordingly any marketing to retail investors will also need to comply with the UK financial promotion regime described above. The AIFMD is a complex area, particularly in relation to the marketing requirements. The AIFMD is now fully in force, the transitional period ended on 22 July (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? There are no restrictions from sponsoring seminars, conferences and other 164

169 England, Scotland and Wales relevant industry events in the Jurisdiction, nor is the distinction between the Manager being primary sponsor or only one of a number of sponsors relevant. As noted in (b) above, if the Manager is to speak at the conference, or provide materials for use at the conference, then the manager must consider the financial promotion restriction and the rules implementing the AIFMD as regards to marketing. It should also be noted that the UK Bribery Act 2010 came into effect on 1st July We have not covered this legislation here in detail; however, Managers should be mindful prior to providing funds to sponsor events in the Jurisdiction, particularly where it may be construed that an advantage may be achieved by the provision of funds (beyond merely profile raising). (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. All such activities are permitted provided that they do not themselves constitute a financial promotion and contravene the financial promotion restriction. The distribution of business cards (including website address) and educational or general market commentary should not in themselves be deemed financial promotions, however if the Manager is in any doubt we would advise that specialist advice is sought. It should be noted that the FCA has published detailed guidance on the use of websites as a vehicle for financial promotions. The contents of websites should be carefully scrutinised in light of the financial promotion restriction. Additionally, the financial promotion rules apply to advertising on the internet which would incorporate websites, s, pop-up ads and sponsored links. Please note that any form of communication can be a financial promotion if it is made in the course of business and includes an invitation or inducement to engage in financial activity which also includes the use of social media. Consideration must also be given to the rules implementing the AIFMD, and whether any such activities or materials would constitute marketing an AIF (see (b) above). (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; 165

170 England, Scotland and Wales (v) other information about the Manager and its services and products. See (d) above. In this case the answer is the same regardless of whether the Manager contacts persons in the Jurisdiction from outside or inside the Jurisdiction. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. There are no restrictions on any of these activities however the Manager should ensure that no conversations or materials distributed at such events could constitute a financial promotion. The Manager should also consider the provisions of the UK Bribery Act 2010 when paying for prospective clients/investors to attend certain events. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. See (f) above. In this case the answer is the same regardless of whether the events take place outside the Jurisdiction. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Yes, cold calling potential investors to communicate a financial promotion is unlawful in the Jurisdiction unless an FPO exemption from the financial promotion restriction can be utilised. Exemptions from the financial promotion restriction make two important distinctions: (a) between real time (e.g. live, telephone or face-to-face) and non-real time (e.g. brochure or ) financial promotions; and (b) between solicited (i.e. when the Manager contacts the investor as a result of a request initiated solely by the investor) and unsolicited (i.e. when the Manager has contacted the investor without a prior request to do so) financial promotions. A cold call would be categorised as an unsolicited real time financial promotion, and few helpful exemptions from the financial promotion restriction exist for this type of financial promotion. Two potential exemptions are Article 19 ( Investment Professionals ) and Article 49 ( High net worth companies, unincorporated associations etc. ) of the FPO. The financial promotion restriction does not apply to any communication made only to a recipient whom the person believes on reasonable grounds to be an investment professional or a director, officer or employee of a high net corporate, partnership or trust who, when acting in that capacity, is involved in investment activity on behalf of that entity. 166

171 England, Scotland and Wales Investment professionals include FCA authorised entities and persons whose ordinary activities involve making investments of the same nature as those being promoted in the cold call. As at the date of this questionnaire, High net worth companies, unincorporated associations etc. include corporate entities or partnerships with a called-up share capital or net assets (as applicable) of not less than 5 million, or for corporate entities with more than 20 shareholders, or net assets of not less than 500,000. Trusts with gross cash and investments of not less than 10 million are also included within the relevant definition. In each case when utilising either of these exemptions the Manager must establish that the recipient of the call falls within the relevant definition prior to communicating the financial promotion (whether at the outset of the call itself or prior to making the call). There are other exemptions potentially available but separate specialist advice should be sought in each case. The marketing provisions of the AIFMD (described in 1(b) above) must also be considered in this regard. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? The Manager may conduct a variety of general marketing activities in the Jurisdiction provided (a) that the activity does not constitute a financial promotion or (b) that if it does constitute a financial promotion, an FPO exemption can be utilised. The two most commonly used exemptions are the Articles 19 and 49 FPO exemptions noted above. Specialist advice should be sought before seeking to utilise any additional exemptions, as certain exemptions are only available in limited circumstances and in relation to limited types of investment. The marketing provisions of the AIFMD (described in 1(b) above) must also be considered in this regard. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? See 3 above - the position is the same. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? There are no restrictions under general financial services law, but UK tax law does impose restrictions on the number of days non-domiciles are permitted to stay and in relation to residency qualification. We would advise you seek specific tax advice taking into consideration all the circumstances. 167

172 England, Scotland and Wales Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Investors in the Jurisdiction are permitted to appoint an offshore investment manager to manage a segregated mandate. There are, in general, no rules or regulations preventing a UK investor from appointing an offshore manager, however certain types of investor, such as Local Government Pension Schemes, are subject to restrictions in relation to the appointment of non EEA managers and specialist advice may need to be sought in this regard. There are two relevant provisos for the offshore investment manager: (i) it must comply with the financial promotion restriction (as discussed previously) when making contact with UK investors (which may have the effect of restricting investors in the fund to investment professionals and high net worth companies etc.); and (ii) it must conduct all of its investment management activities outside of the UK and must not have a permanent place of business in the UK (as investment management is a regulated activity in the UK and requires prior FCA authorisation and ongoing regulatory requirements when conducted in the UK). Where investment management activities are carried out for UK investors it is not always clear cut whether those activities are carried out in the UK or offshore. For example, if investment professionals visit a UK client to discuss the mandate, care needs to be taken to ensure that regulated activities are not carried on in the UK. If the Manager is in any doubt specialist advice should be sought. As described in Part I 1(b) above, since 22nd July 2013, the AIFMD has been in effect and transposed into UK law by the Regulations, and into the FUND chapter of the FCA Handbook. This requires all AIFMs to either comply with the AIFMD provisions, or utilise an exemption. With respect to investment management services, as with marketing, the AIFMD includes the concept of a passport, to enable an AIFM authorised in one EU Member State, to passport its services as an AIFM throughout the EU, without having to be separately authorised in each Member State into which it intends to provide services. However, in order to obtain the passport, or become authorised in the UK under the implementing provisions of the AIFMD, the AIFM must first satisfy the requirements of the AIFMD, and go through the authorisation process with the FCA. There are certain exemptions available from the AIFMD (e.g. for managers already authorised as a UCITS manager), and a more limited set of rules apply for AIFMs with AUM below a certain threshold: either EUR 500 million or below where the AIFs are unleveraged and have no redemption rights exercisable during a period of 5 years following the date or initial investment in the AIF; or EUR 100 million (including leverage). As described in Part I 1(b) above, existing AIFMs (i.e. AIFMs managing AIFs prior to 22nd July 2013) have been required to take all necessary measures to comply with the Regulations since 22nd July 2013 and have submitted 168

173 England, Scotland and Wales applications for new permissions for managing an AIF or for AIFMD registration prior to 22 July As with the marketing provisions, the AIFMD is complex in this regard, and we would advise that specialist bespoke advice be sought. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Yes, the financial promotion restriction will apply, and marketing activities that constitute a financial promotion must fall within an FPO exemption or be approved by an authorised person. Note also the marketing provisions of the AIFMD, as described Part I 1(b) above also apply. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. There is an exemption from the financial promotion restriction for any solicited real time communication which is made by an overseas investment manager in the course of or for the purposes of his carrying on the business of engaging in relevant investment activities outside the United Kingdom (Article 30 FPO). In summary, provided the UK investor has initiated the call, the investment manager may describe its services in a real time communication (e.g. in response over the phone). Follow-up non-real time communications (which include ) are subsequently permitted provided they are made to the same recipient of the initial solicited real time communication, they relate to the same controlled activity (i.e. investment management services) and are made within 12 months of the initial communication. Note that the Article 19 and Article 49 FPO exemptions will also be relevant here if the prospective investor falls within the relevant definitions used in those Articles (see above). These are the most commonly used FPO exemptions by overseas Managers. Note also in addition that the provisions of the AIFMD, as described in Part I 1(b) above also apply. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, see above (Part II 3) regarding solicited real time communications. The "request for proposal" should constitute an "express request" from the recipient of the "financial promotion" and accordingly the "request for 169

174 England, Scotland and Wales proposal" should be sent to the Manager directly. Note that the Article 19 and Article 49 FPO exemptions may also be relevant here. If the request for proposal is issued by an investment professional (for example), then the Manager communicates a financial promotion to the "investment professional" (regardless of whether the "request for proposal" for public or private), provided the exemption is properly utilised (i.e. relevant documents have the appropriate disclaimer see example below). Note also in addition that the provisions of the AIFMD, as described in Part I 1(b) above also apply. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Yes, see above (Part II 3) regarding solicited real time communications. Note also that the Article 19 and Article 49 FPO exemptions may also be available depending on the identity of the prospective investor. Note also in addition that the provisions of the AIFMD, as described in Part I 1(b) above also apply. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Yes, see above (Part II 3) regarding solicited real time communications. Note also that the Article 19 and Article 49 FPO exemptions may also be available depending on the identity of the prospective investor. Note also in addition that the provisions of the AIFMD as described in Part I 1(b) above, also apply. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No, but any disclaimer language should be in English. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. 170

175 England, Scotland and Wales (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? If the contract is governed by Scots or English law, there are some standard formality requirements for the agreement. We would advise that specialist advice be sought when drafting the agreement. 171

176 England, Scotland and Wales Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Yes, provided all marketing efforts are in compliance with the financial promotion regime, which typically has the effect of limiting the pool of investors to investment professionals and high net worth companies, partnerships etc. (see above). It is not possible to conduct a retail offering of a fund in the UK without compliance with onerous regulatory requirements. Accordingly offshore Managers typically limit their offering to investors falling within the Articles 19 and 49 FPO exemptions. We should also note that we are assuming the fund in question will be treated as an open-ended collective investment scheme, rather than a closed-ended fund or investment company. The latter categories are subject to additional offer restrictions as a result of the implementation in the UK of the EU Prospectus Directive (as amended) (see below for further details). The definitions of "open-ended" and "collective investment scheme" are not always clear cut in the UK and if the Manager is in any doubt specialist advice should be sought. Additionally, the EU Prospectus Directive has not been amended by AIFMD and closed ended AIFs that are making an offer of securities to the public need to comply with the requirements under both directives. Note also that the provisions of the AIFMD discussed in Parts I and II affect the responses in this Part III. Specialist advice should be sought with respect to how the AIFMD will impact the marketing of unregistered offshore funds. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. Non-Public Offerings in the Jurisdiction must be conducted in compliance with (a) the UK financial promotion regime (as discussed above) and (b) the EU Prospectus Directive (implemented in the UK and throughout the EU). Provided the non public offer is made in accordance with these regimes, and the Manager conducts all its business offshore, then there is no requirement for the Manager or the Fund to be registered or authorised in the Jurisdiction. The EU Prospectus Directive does not apply to units issued by collective investment undertakings (i.e. funds) other than the closed-end type, as such 172

177 England, Scotland and Wales the marketing of open-ended offshore funds need focus only on compliance with the UK financial promotion regime in this context. The definitions of "open-ended" and "collective investment scheme" are not always clear cut in the UK and if the Manager is in any doubt specialist advice should be sought. As regards units/interests in closed-ended funds or companies, the EU Prospectus Directive prohibits any offer of securities (which includes units/interests in closed-ended funds) to be made to the public in the UK without prior publication of a prospectus. There are some helpful exemptions from this requirement as set out in section 86 of FSMA: (a) where the offer is addressed solely to qualified investors; (b) where the offer is addressed to fewer than 150 natural persons per Member State (who are not qualified investors); (c) where the offer is addressed to investors who acquire securities for a total consideration of at least EUR 100,000 per investor for each separate offer; and/or (d) where the offer of securities has a denomination per unit of at least EUR 100,000. A common approach of making offers in the Jurisdiction is to restrict the offer to investors falling within the relevant definitions in Articles 19 and 49 of the FPO (see above) who may also meet the definition of a "qualified investor under the EU Prospectus regime. The definition of a qualified investor is quite broad and includes all legal entities authorised or regulated to operate in the financial markets as well as entities not regulated but whose corporate purpose is solely to invest in securities. Offer documents and marketing materials issued by the Manager in the Jurisdiction, when seeking to rely on Articles 19 and 49 of the FPO, typically include the disclaimer language noted in italics below in a prominent position towards the start of the document. Note that this language will not always be appropriate, in particular if other exemptions are being sought, or these exemptions are not appropriate for the type of investors being contacted. We would advise that specialist advice is sought before using this disclaimer (additional language may be required for a closed-end fund). This [insert name of document] is only addressed to and directed at persons in the United Kingdom who are (1) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order ) or (2) high net worth entities falling within Article 49(2)(a)-(d) of the Order (all such persons collectively being referred to as relevant persons ). The [insert name of fund interests] are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged only with relevant persons. This [insert name of document] should not be acted upon or relied upon in the United Kingdom by persons who are not relevant persons. Note that the marketing provisions of the AIFMD, discussed in Part I 1(b), also apply here. 173

178 England, Scotland and Wales 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? Not applicable, see above. Note that the AIFMD introduced new requirements for AIFMs wishing to market AIFs in the EU (and by extension the UK). AIFMs should seek advice to ascertain the impact of the AIFMD on their business. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Yes, please see responses above regarding the financial promotion restriction and related exemptions. Also note the marketing provisions of the AIFMD discussed in Part I above. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? Please see responses above regarding the financial promotion restriction and related exemptions. Also note the marketing provisions of the AIFMD discussed in Part I above. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? As discussed above, it is possible for UK FCA authorised entities to approve financial promotions on behalf of other entities. However, it is more common for offshore fund managers to issue financial promotions themselves in reliance on an FPO exemption. Also note the marketing provisions of the AIFMD discussed in Part I above. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? Yes, representatives of the Manager or the Fund may accompany the UK FCA authorised appointed marketing agent (if applicable), however those representatives are still required to comply with the UK financial promotion regime, and as such communications by those representatives that are 174

179 England, Scotland and Wales financial promotions will need to be either approved by the UK FCA authorised appointed marketing agent or exempt from the financial promotion restriction (e.g. because the prospective investors are all investment professionals and high net worth entities). Also note the marketing provisions of the AIFMD discussed in Part I above. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? See response to the same question above. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes, subject to compliance with the UK financial promotion regime discussed above. Also note the marketing provisions of the AIFMD discussed in Part I above. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? See response to the same question above. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? See response to the same question above. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? See response to the same question above. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No, but any disclaimer language should be in English. 175

180 England, Scotland and Wales (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? If the contract is governed by Scots or English law, there are some standard formality requirements for the agreement. In addition, there are certain terms included in such agreements to reflect market practice in the UK. We would advise that specialist advice be sought when drafting the agreement. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? If the shares in the Fund were listed on an EU stock exchange then certain additional exemptions from the UK financial promotion regime may be applicable. If listed on an exchange outside the EU then the answers would not change. (b) the Fund was structured as a unit trust rather than as a company? No. (c) the Fund was structured as a limited partnership rather than as a company? No. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? Yes, see response above discussing the EU Prospectus Directive. Please note, as mentioned above, that the definitions of open-ended and closedended are not clear cut in the UK, and there can be ambiguity as to which rules and regulations apply. We would advise that if the Manager is in any doubt, specialist advice be sought. 176

181 England, Scotland and Wales Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? The UK financial promotion regime will still apply to all communications that constitute a financial promotion, however there is an FPO exemption available for follow-up financial promotions (Article 14 FPO) as discussed previously, and furthermore if the investor is an investment professional", then the Article 19 FPO exemption will be available for all communications (all financial promotions should include the relevant disclaimer). Specialist advice should be sought in relation to a Manager s ability to continue to market in the UK in respect of the AIF(s) it manages which fall within the scope of AIFMD. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? As noted above, the UK financial promotion regime will apply to all communications, but there are no regulatory rules expressly restricting an offshore manager from meeting investors in the Jurisdiction, provided the Manager does not create a permanent place of business in the Jurisdiction and/or conduct regulated activities in the UK (e.g. the provision of investment advice). It is not always clear cut whether regulated activities are carried out in the UK or offshore. For example, if investment professionals visit a UK client to discuss the mandate, care needs to be taken to ensure that regulated activities are not carried on in the UK. If the Manager is in any doubt specialist advice should be sought. There may also be tax consequences of spending certain time in the Jurisdiction on business. Specialist advice should be sought. Specialist advice should be sought in relation to a Manager s ability to continue to market in the UK in respect of the AIF(s) it manages which fall within the scope of AIFMD. 177

182 England, Scotland and Wales Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The UK Financial Conduct Authority. Note that from 1 st April 2013, the UK Financial Services Authority (formerly referred to as the FSA ) ceased to exist, and was replaced with a new regulatory architecture. At a high level this involves at a micro level the Financial Conduct Authority looking after conduct of business matters (e.g. consumer protection issues such as financial promotions and fulfilling the role of the UK listing authority) and the Prudential Regulatory Authority responsible for prudentially significant firms (e.g. banks, insurance firms and large significant asset managers). At a macro level the Bank of England assumes overall responsibility (with its Financial Policy Committee responsible for the overall stability of the UK financial system). 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The UK Financial Services and Markets Act Alternative Investment Fund Managers Directive (2011/61/EU) and Alternative Investment Fund Managers Regulations 2013/1773. Helpful guidance on the UK financial promotion regime and related activities is included at Chapter 8 of PERG (available on the FCA website). The rules implementing AIFMD have been in force via the Investment Funds sourcebook FUND chapter of the FCA Handbook (available on the FCA website). 178

183 Luxembourg Questionnaire for Luxembourg (the Jurisdiction ) Law Firm: Arendt & Medernach S.A. Website: Contacts: Michèle Eisenhuth, Stéphane Karolczuk, Claire Manier, Marc Mouton and Illia Neizvestny Telephone: , Date: 31 October michele.eisenhuth@arendt.com; HKOffice@arendt.com In this questionnaire: Consumer means any natural person who does not act in his/her professional capacity Directive 2009/65/EC means Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities Fund means an open-ended offshore (i.e. not established in a Member State) fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. For the purpose of our developments below, we have assumed that the Fund qualifies as an alternative investment fund within the meaning of the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 ( AIFMD ). Manager Member State means an offshore (i.e. not established in a Member State) investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. means a Member State of the European Union and the States that are contracting parties to the agreement creating the European Economic Area other than the Member States of the European Union. Please note that the directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU ( MiFID II ) and the Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets 179

184 Luxembourg in financial instruments and amending Regulation (EU) No 648/2012 ( MiFIR ) have been voted on and published in the European Official Journal. These texts could further impact our developments once they are implemented (where applicable) in Luxembourg (expected fourth quarter 2016) and enter into force (January 2017). Disclaimer and Important Notice Whilst a best efforts approach has been taken to ensure the accuracy of the answers provided in relation to this questionnaire, as at the date thereof, answers to this questionnaire are only designed to provide with summarised, and therefore non complete, information regarding the questions raised and, as such, do not constitute legal advice and do not substitute for the consultation with legal counsel required prior to any undertakings. If you would like to receive a legal advice on any of the issues raised in this questionnaire, please contact us at the number/ address above. Please note that this document and our answers to this questionnaire have been prepared without charges for the benefit of the members of the LexMundi network of law firms and certain of their clients. It shall not be transmitted, communicated or in any other manner disseminated, by itself or as part of another document, in all or part, to any other person and in no circumstances will a fee be charged for providing this document and the content thereof, by itself or as part of another document, in all or part, without our prior written consent. 180

185 Luxembourg Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. Permitted. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. We assume for the purpose of this question that : the Manager is making a general presentation on a topic related to the investment management industry; the Manager does not solicit from its audience the purchase of a product or service; the Manager does not produce or disseminate any investment recommendation (i.e. a research or other information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers of financial instruments, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public (i.e. to be made publicly available and become information accessible for a large number of persons)). This is permitted to the extent the Manager refrains from any action that could be analysed as contrary to rules on unfair competition and unfair commercial practices (see question 1 (d)) and to the extent this activity does not amount to marketing activities within the meaning of the Luxembourg law of 12 July 2013 on alternative investment fund managers (the 2013 Law ) implementing the AIFMD. Marketing is defined in the 2013 Law as a direct or indirect offering or placement at the initiative or on behalf of the alternative investment fund manager ( AIFM ) of units or shares in an alternative investment fund ( AIF ) it manages to or with investors domiciled or with a registered office in the European Union. Please refer to question 1 (d) Part I below for more information on marketing under the 2013 Law and applicable rules. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? Permitted, to the extent the Manager refrains from any action that could be analysed as contrary to rules on unfair competition and unfair commercial practices (see question 1 (d)). No difference whether the Manager is the primary sponsor or one among a number of sponsors. 181

186 Luxembourg As mentioned under 1 (b) above, the sponsoring should not amount to marketing activities within the meaning of the 2013 Law. Please refer to question 1 (d) Part I below for more information on marketing under the 2013 Law and applicable rules. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. We assume that no investment recommendation defined as research or other information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers of financial instruments, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public (i.e. to be made publicly available and become information accessible for a large number of persons) will be produced or given by the Manager. 1. Principle: activities allowed As a matter of principle, marketing activities are not subject to authorisation requirements in Luxembourg and are permitted subject to the rules set out below under point 2. However, should the marketing activities entail, during a meeting in Luxembourg, the provision of financial services such as the reception and transmission of an order in relation to e.g. shares or units in undertakings for collective investment ( UCIs ) admitted to trading in Luxembourg, the activity may be considered as an activity of distribution of shares or units in UCIs admitted to trading in Luxembourg subject to authorisation requirements pursuant to the law of 5 April 1993 on the financial sector, as amended (the 1993 Law ). We draw in particular your attention to the fact that the boundaries between mere marketing activities and distribution activities are not very clear since there is no specific definition of the activities which are to be regarded as distribution activities within the meaning of Article 24-7 of the 1993 Law. Further, if the Manager recommends, during a meeting in Luxembourg, to the relevant investors it will meet, to invest in a product or, in any manner, brings a fund and investors together for the purpose of the latter subscribing in such a fund, such activities could, depending upon the circumstances, be regarded as regulated activities under the 1993 Law, respectively as investment advice or brokerage activities, and trigger authorisation requirements. Therefore, while in Luxembourg, the Manager should strictly limit its 182

187 Luxembourg activities to the provision of general information about the products and its services and refrain from engaging in any activities which could be seen or interpreted, directly or indirectly, as delivering investment advice or recommendation and/or inviting investors to subscribe for investment products or services. 2. Legal framework While engaging in the activities described above, the Manager should comply with a number of specific Luxembourg laws including in particular those described below Material restrictions/ prohibitions relating to Consumer protection Material restrictions/prohibitions would essentially affect the marketing directed at clients or potential clients qualifying as Consumers. Relevant provisions of the Consumer Code relating to business-toconsumer unfair commercial practices (hereinafter the Relevant Provisions ) The Relevant Provisions of the Consumer Code implement Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (the Unfair Commercial Practices EU Directive ). They prohibit unfair commercial practices which, when adopted by professionals, undermine the economic interests of Consumers before, during or after the offer for sale and the sale of products. A prohibited unfair commercial practice is defined as any practice which is both contrary to the requirements of professional diligence and liable to, in particular, substantially alter the economic behaviour of the average Consumer with regard to the product concerned. This definition encompasses misleading actions, misleading omissions and aggressive commercial practices. The Consumer Code provides that, i.a., personal visits to the domicile of a Consumer while a Consumer has refused to be solicited or ignoring the Consumer s request to leave his/her domicile and/or not to return to the Consumer s domicile and unwanted solicitations by telephone, fax, or other remote media means qualify per se as prohibited aggressive commercial practices except in circumstances and to the extent justified to enforce a contractual obligation. The parliamentary works evidence that the Luxembourg legislator chose to implement the Unfair Commercial Practices EU Directive in a restrictive manner by enlarging the scope of behaviours deemed as prohibited solicitations, by deleting the term persistent before and unwanted solicitation in order to align the new provision with the existing provision contained in the 1987 Law (which has been since then repealed).the term solicitation in the Consumer Code may thus arguably be understood in the same way as the term solicitation was interpreted in the 1987 Law. Please note however that there is no published case law which clarifies this question yet and the 1987 Law 183

188 Luxembourg has since then been repealed Law of 30 July 2002 on certain commercial practices and unfair competition The amended law of 30 July 2002 on certain commercial practices and unfair competition (the 2002 Law ), which implements the Directive 97/55/EC of European Parliament and of the Council of 6 October 1997 amending Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising, sets out a general set of rules relating, amongst others, to the prohibition of misleading advertising. The 2002 Law defines advertising as any form of communication in the context of a commercial activity, with the purpose of promoting the supply of goods or services. Misleading advertising is defined as any advertising which, in any way whatsoever, including the way in which it is presented, misleads or could mislead the addressees or the persons affected and which thus could influence their economic behaviour, or, for those reasons, adversely affects a competitor or could possibly adversely affect a competitor. The 2002 Law also contains provisions regulating comparative advertising. Given the broad definition of advertising, the communication of all types of information listed above, including the provision of general corporate information regarding the Manager could qualify as advertising in the sense of the 2002 Law and must therefore comply with the provisions of the 2002 Law Use of a website for the promotion of offshore funds We understand that the Manager could provide the address of a website on which the Manager has information available about its activities and products. The mere communication of the Manager s website address does not trigger any specific obligation (however, please refer to question 1 (e) below for more information on the specificities applicable to the use of websites) Marketing under the 2013 Law The 2013 Law imposes requirements for marketing AIFs to investors in Luxembourg. In addition, the Luxembourg supervisory authority of the financial market, the Commission de Surveillance du Secteur Financier (the CSSF ) published on 10 August 2015 a revised version of its frequently asked questions document (the CSSF AIFMD FAQ ), which inter alia includes regulatory guidance on reverse solicitation and marketing of AIFs. Pursuant to this guidance reverse solicitation consists in providing information regarding AIFs and making units or shares of AIFs available for purchase following an initiative of the investor without any solicitation made by the AIF or its AIFM. The CSSF places the burden of proof of the aforementioned components on the AIFM. The AIFM can demonstrate by means of a written confirmation from the investor that 184

189 Luxembourg the investor has decided on its own initiative to invest in the relevant AIF. However the enforceability of such a declaration may be affected by the review of the factual situation by a court. The CSSF defines marketing within the meaning of the 2013 Law as taking place when the AIF, the AIFM or an intermediary on their behalf seeks to raise capital by actively making units or shares of an AIF available for firm purchase by a potential investor. However, draft documents provided to prospective investors do not constitute a marketing activity pursuant to the Law of 2013 as long as these documents cannot be used by prospective investors to formally subscribe or commit. Furthermore, rules on marketing will vary depending on a number of factors such as the location of the investment manager, the location of the fund it manages, whether the investment manager has been authorised under the AIFMD, etc. The AIFMD, implemented in Luxembourg by the 2013 Law, creates a passport system within the Member States and allows authorised AIFMs to manage AIFs in any Member State on the basis of their home Member State authorisation as well as to market these AIFs to professional investors within any Member State. Considering that the Manager is not established in a Member State, it cannot benefit directly from the passport (for the time being) and it will have to rely on the private placement regime available in Luxembourg. The extension of such a passport to non-eu AIFMs is currently being assessed by the competent European authorities on a country by country basis. In July 2015, ESMA, the European Securities and Markets Authority, did not reach a definitive view of Hong Kong and Singapore, two of the six jurisdictions assessed by ESMA by July In October 2015 ESMA stated that it is continuing its assessment of Hong Kong and Singapore with a view to reaching a definitive conclusion on whether to extend the passport to these jurisdictions and that it will start assessing Japan. In parallel to this ongoing assessment of non-eu jurisdictions, ESMA is putting in place the framework necessary to extend the passport to one or more non-eu countries. No timeline was communicated. Rules on marketing also differ depending on whether the fund is closed-ended or open-ended. Since in the case at hand, the Fund is open-ended, we will not discuss further the rules applicable to closedended funds. With respect to the marketing of an AIF in Luxembourg, a distinction shall further be drawn between marketing to professional investors (as defined under the 2013 Law) and marketing to retail investors. Currently, the following rules apply in Luxembourg when a non-eu AIFM markets an AIF to professional investors under Article 42 AIFMD, as implemented into Luxembourg law by Article 45 of the 2013 Law: a prior notification needs to be made to the CSSF; 185

190 Luxembourg in addition, compliance with transparency and disclosure conditions, reporting requirements, cooperation arrangement and information exchange agreements between relevant authorities must be ensured and there should be no link to a non-cooperative country and territory as listed by the Financial Action Task Force; the non-eu AIFM shall comply with section XIII (Guidelines on disclosure) of the ESMA s guidelines on sound remuneration policies under AIFMD; where applicable, the non-eu AIFMs should not contravene the Luxembourg Consumer Code. Additional rules to those detailed above for marketing to professional investors shall be applicable in the context of the marketing of the Fund to retail investors (cf. Article 43 AIFMD, as implemented into Luxembourg law by Article 46 of the 2013 Law): authorisation from the CSSF shall be sought (cf. Article 129 of the 2010 Law); the Fund shall be subject in its home Member State to a permanent supervision performed by a supervisory authority set up by law in order to ensure the protection of investors. This supervision must be considered by the CSSF to be equivalent to that laid down in the law of 17 December 2010 on undertakings for collective investment, as amended (the 2010 Law ) (cf. Article 100 of the 2010 Law); cooperation between the CSSF and the supervisory authority of the Fund shall be ensured; a credit institution to ensure that facilities are available in Luxembourg for making payments to unitholders and repurchasing or redeeming units shall be appointed. The Fund shall put in place necessary measures to ensure that the information which it is obliged to provide is made available to unitholders in Luxembourg (cf. Article 59 of the 2010 Law). Through its CSSF AIFMD FAQ the CSSF clarifies furthermore that the AIFM is permitted to present to prospective investors documents in relation to the AIF it manages prior to informing the CSSF in accordance with Article 45 of the 2013 Law provided however that such investors may not yet formally invest or commit in the AIF. Furthermore, the CSSF has confirmed that no marketing activity takes place in the context of a discretionary mandate for the management of individual investment portfolios where it is at the initiative of the investment manager. Each particular case should be reviewed however to ascertain whether this exception/clarification may apply. 186

191 Luxembourg (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) (v) the website address of the Manager; other information about the Manager and its services and products. Please see our answer above. With the publication of its recently revised CSSF AIFMD FAQ, the CSSF clarified, that distance marketing will qualify as marketing under the 2013 Law in Luxembourg if the investors are domiciled or have their registered office in Luxembourg and the relevant materials can be used to subscribe for shares or units of the AIF. In addition, please also note the following: 1. We draw your attention to the relevant provisions of the Luxembourg Consumer Code relating to the distance marketing of financial services and marketing occurring outside the place of business of a professional (hereinafter the Relevant Provisions ). The Relevant Provisions replicate for most parts the provisions of the former law of 18 December 2006 (which has been repealed with the introduction of the Consumer Code into Luxembourg law) (the 2006 Law ) which implemented the EU Directive 2002/65/EC concerning the distance marketing of consumer financial services. The Relevant Provisions potentially apply in case of advertising at a distance of financial services. Unsolicited commercial communications to Consumers by , fax, telephone or other automatic calling systems which do not involve human intervention may only be used if the Consumer has given his prior consent. All other means of individualised distance communication (such as traditional post mail) can only be used in the absence of manifest opposition from the Consumer. The Relevant Provisions do not make any distinction as to whether the contacted person is already a customer of the person/entity that undertakes the marketing or not. In the absence of relevant case law, there is uncertainty as to whether this provision also applies to mere commercial communications 1 on financial services, since such commercial communications can be carried out independently from any contract (i.e. also towards prospects with which no agreement will be concluded). The parliamentary works that led to the adoption of the 2006 Law specify, however, that the provisions on commercial communications on financial services are of general application meaning that they should apply, even independently from a contractual situation. Accordingly, the rules above 1 any form of communication designed to promote, directly or indirectly, the goods, services or the image of a professional (article L of the Consumer Code) 187

192 Luxembourg will need to be complied with for all commercial communications directed towards Consumers. However, the Relevant Provisions only provide for sanctions to be inflicted on persons responsible for entities subject to the authority of the Luxembourg supervisory authority of the financial sector, the CSSF. Therefore, regarding foreign entities that do not fall under the authority of the CSSF, there are arguments to consider that the abovementioned provisions of the Relevant Provisions would not be applicable. 2. The amended law of 14 August 2000 on electronic commerce (the 2000 Law ) is potentially applicable when advertising or offering products by . The 2000 Law provides that the law of the place at which the information society service provider is established applies to service providers and to the services they provide, without prejudice to the freedom of the parties to choose the law applicable to their contract. The 2000 Law sets out rules i.a. regarding electronic commercial communications sent by a provider of services of an information society, which is established or has its places of business in Luxembourg. In particular, if the non-solicited commercial communication is sent to a natural person, the latter must first have given his prior consent. However, if the service provider has previously directly obtained its clients' electronic contact details, in the context of a sale of a product or service, then the provider may use these electronic contact details for marketing purposes for similar products or services provided by itself. Such use is only possible subject to the condition that the clients are clearly and expressly given the right to oppose such use of their electronic contact details, without cost and in an easy manner. This right must be given both when the contact details are collected and with each new message if the client does not refuse the use of his contact details from the start. However, since we understand that the Manager is located outside Luxembourg, the 2000 Law would a priori not be applicable to the Manager. 3. With respect to the use of a website, certain obligations may be applicable depending on the content of the website. Should the website contain information about foreign UCIs, and assuming that Luxembourg law is applicable, the following rules would apply. The CSSF has generally no objection to provide via website information on open-ended investment funds registered or not for public distribution in Luxembourg if the website complies with the following conditions: the website is limited to information purposes (no internet ordering facility); the information available to investors has to be transparent. This 188

193 Luxembourg information must enable the investors to understand and appraise the product (investment fund domicile, registered or not in Luxembourg for public distribution, investors' eligibility criteria). In relation to the denomination, the language, the limitations and routing of visitors of the website, the CSSF considers that the set up of the website should be designed in a way to avoid any content of information that may be assimilated to a public offer in a country where investment funds are not authorised for public distribution. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Permitted, to the extent described above. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Permitted, to the extent described above. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Not permitted. Personal visits to the domicile of a Consumer while a Consumer has refused to be solicited or ignoring the Consumer s request to leave his/her domicile and/or not to return to the Consumer s domicile, unwanted solicitations by telephone, fax, or other remote media means qualify as prohibited aggressive commercial practices under the Consumer Code. Please refer to our answers above concerning Consumers protection, and more specifically to the indications given in relation to the Relevant Provisions of the Consumer Code concerning aggressive commercial practices and the distance marketing of consumer financial services. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? Any type of marketing activity is allowed to the extent described above. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? Any type of marketing activity is allowed to the extent described above. 189

194 Luxembourg 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? Considering that the definition of Manager in this Questionnaire excludes its continuous physical presence in Luxembourg, we understand that the Manager does not have a permanent establishment in Luxembourg (i.e. notably a place of management, branch, office, factory, workshop, etc ) to which profits are attributable in the sense of Luxembourg tax laws or paragraphs 1 and 2 of Article 5 in the OECD Model Convention (i.e. a fixed place of business through which the business of an enterprise is wholly or partly carried on). However, as the Manager will participate, from time to time, in seminars, conferences and other relevant industry events in Luxembourg as well as speak at or sponsor such events etc, depending on the frequency of the marketing activities to be undertaken and should it be undertaken by an employee or another person who has sufficient authority to bind the Manager s participation in the marketing activities in Luxembourg, such Manager could be considered as having a permanent representative/establishment in Luxembourg pursuant to Luxembourg tax laws or paragraph 5 of Article 5 in the OECD Model Convention. In the framework of the Base Erosion Profit Shifting (BEPS) project, the OECD published on 5 October 2015 its final report. Action 7 relates to combatting strategies resulting in the artificial avoidance of permanent establishment and redefines the permanent representative definition in such a way that even the fact a person plays a principal role leading to the conclusion of contracts at a regular manner could result in the existence of a permanent representative in the respective jurisdiction. A case-by-case analysis would be recommended to determine whether the activities are performed repeatedly or in isolated cases and whether they lead to the recognition of a permanent representative/ establishment. However, depending on the State of establishment of the Manager and should this State have concluded a double tax treaty ( DTT ) with Luxembourg, such DTT may include a provision concerning the frequency, this scope and other characteristics of the activities of an individual constituting or not such a permanent establishment in Luxembourg. For instance, a permanent establishment may be constituted in case (i) the individual is present in Luxembourg for more than 183 days in aggregate, during a twelvemonth period and (ii) (a) should 50 % of the gross revenues of the enterprise be derived from the services performed in Luxembourg through this individual or (b) should these services be performed for the same project or connected projects through one or more individuals. As a result of the above, income derived by the Manager in Luxembourg from its marketing activities might be subject to taxation in Luxembourg in case the Manager would be considered as having a permanent representative/ establishment in Luxembourg through the activities undertaken by the individual for the Manager. 190

195 Luxembourg Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore Manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Investors established in Luxembourg may appoint an offshore Manager to provide individual portfolio management services in relation to an account or portfolio. For the purpose of the description below, we have assumed that the Manager does not qualify as an alternative investment fund manager under the 2013 Law or the AIFMD. However, the Manager is not authorised to perform any management activity without authorisation whilst being present on the Luxembourg territory. Guidance as to whether the relevant services are to be regarded as being provided on the Luxembourg territory may be found in the 1993 Law and in the CSSF Circular Letter 11/515. Pursuant to Article 32 (5) of the 1993 Law, authorisation requirements apply to third countries entities (such as the Manager) which exercise activities relating to the financial/banking sector in their home country, which do not have an establishment in Luxembourg and which come occasionally and temporarily to Luxembourg in order to provide services which are subject to the 1993 Law. The CSSF considers, in its Circular Letter 11/515, that Article 32 (5) of the 1993 Law only covers situations where agents travel physically to Luxembourg and, moreover, only where they carry out activities covered by the 1993 Law whilst being present in Luxembourg. These authorisation requirements thus only apply where the employees of the foreign entity are physically present in Luxembourg and provide the relevant financial services as such when being on the Luxembourg territory. Accordingly, the mere fact to have clients residing in Luxembourg would not be sufficient in itself to make those agents subject to authorisation requirements. Also, meetings in Luxembourg which aim at informing the public on the Manager s activities as well as advertising its activities in Luxembourg, including prospecting, advertising and organisation of road shows would not fall within the scope of authorisation requirements. Where mere courtesy meetings are arranged with clients in Luxembourg, such visits would also not fall within the scope of authorisation requirements to the extent that banking/financial services are not provided during such visits. Accordingly, if the actual portfolio management services are provided at a distance in the Manager s home country and if during meetings in Luxembourg no actual services are provided, but only tasks preceding or following the actual portfolio management service are discussed, no authorisation requirements should arise. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? 191

196 Luxembourg No, to the extent described under Part I and in question 1 of Part II. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, to the extent described under Part I and in question 1 of Part II. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, to the extent described under Part I and in question 1 of Part II. There is no difference between private and public request for proposal. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Yes, to the extent described in Part I and in question 1 of Part II. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Yes, to the extent described in Part I and in question 1 of Part II. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? No. The terms of the agreement should however be understood by both parties. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes. However, it should be mentioned that such a choice of law may be challenged in certain cases, inter alia: the Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) ( Rome I ) contains provisions protecting Consumers; Rome I provides for some limits to the full application of the law chosen by the parties notably in case mandatory rules ( lois de police ) of the forum apply or where the application of the provisions of the law chosen by the parties is manifestly incompatible with the international public policy ("ordre public") of the forum. 192

197 Luxembourg (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? No. 193

198 Luxembourg Part III Cross-Border Marketing of Unregistered Offshore Funds Non- Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. Yes. Please refer to our answer to question 1 (d) Part I regarding marketing of the Fund in Luxembourg. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. Please refer to our answer to question 1 (d) Part I regarding marketing of the Fund in Luxembourg. 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? Please refer to our answer to question 1 (d) Part I regarding marketing of the Fund in Luxembourg. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Please refer to our answers under Part I and question 1 of Part II. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? The representatives of the Fund or the Manager may market the Fund to the extent described under Part I and question 1 of Part II. Should the marketing activity entail the provision of a financial service (e.g. the reception and transmission of order, investment advice, etc.), the Fund or Manager will need to obtain authorisation from the Minister of Finance. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? A local distributor may provide support to market the Fund to investors. The local agent may market the Fund to the extent described under Part I and question 1 of 194

199 Luxembourg Part II. Should the marketing activity entail the provision of a financial service (e.g. the reception and transmission of order, investment advice, etc.), the local distributor will need to obtain authorisation from the Minister of Finance, e.g. as a distributor of UCIs (unless it benefits from a MiFID passport). 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? Yes, to the extent disclosed under Part I and question 1 of Part II. 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, to the extent described in Part I and in question 1 of Part II. There is no difference between private or public request for proposal. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Yes, to the extent described under Part I and question 1 of Part II. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Yes, to the extent described under Part I and question 1 of Part II. 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No, to the extent the terms of the agreement are understood by both parties. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? 195

200 Luxembourg Yes. However, it should be mentioned that such a choice of law may be challenged in certain cases, inter alia: the Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) ( Rome I ) contains provisions protecting Consumers; Rome I provides for some limits to the full application of the law chosen by the parties notably in case mandatory rules ( lois de police ) of the forum apply or where the application of the provisions of the law chosen by the parties is manifestly incompatible with the international public policy ("ordre public") of the forum. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? No. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? No. (b) the Fund was structured as a unit trust rather than as a company? No. (c) the Fund was structured as a limited partnership rather than as a company? No. (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? No. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? No, if the distribution is private. However, should the shares/units be distributed to the public and to the extent no exception may be applicable, a prospectus compliant with the Luxembourg law of 10 July 2005 regarding prospectuses for securities (the Prospectus Law ) is compulsory. For the purpose of the Prospectus Law, an offer to the public is defined as a communication to persons in any form and by any means presenting 196

201 Luxembourg sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe to these securities. 197

202 Luxembourg Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? Please see our answers under Part I and question 1 of Part II. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Please see our answers under Part I and our answer to question 1 in Part II. No actual financial service (such as investment advice or reception and transmission of orders) may be provided during a meeting in Luxembourg. Tasks preceding or following a financial service may be discussed during a meeting in Luxembourg. 198

203 Luxembourg Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Commission de Surveillance du Secteur Financier. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The law of 12 July 2013 on alternative investment funds managers, the law of 17 December 2010 on undertakings for collective investment as amended, the law of 13 February 2007 on specialised investment funds as amended and the law of 5 April 1993 on the financial sector as amended. 199

204 Switzerland Questionnaire for Switzerland (the Jurisdiction ) Law Firm: Lenz & Staehelin Website: Lawyer: Shelby R. du Pasquier Catherine Zeter Telephone: Date: 31 October shelby.dupasquier@lenzstaehelin.com catherine.zeter@lenzstaehelin.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to any of the contacts listed. 200

205 Switzerland INTRODUCTION Summary of the main regulations on the offering of financial services and products in Switzerland The below is a general overview of the main applicable rules and restrictions to serve as an introduction to the questionnaire. Please note that tax matters are not covered. 1. Cross-border offering of financial services 1.1 General rules As a general rule, financial services (including private banking services, discretionary asset management, advisory, mortgage services, trust services and credit facilities) may be freely marketed or rendered in Switzerland without any prior consent or authorization, provided that (i) (ii) (iii) the services are provided exclusively on a cross-border basis without any permanent local presence (Swiss branch or Swiss representation office) and/or employees in Switzerland, subject to ; shares or units in collective investment schemes as defined by the Collective Investment Schemes Act, as amended ("CISA") are not offered to investors in or from Switzerland, except in strict compliance with the distribution rules (see Section 2.1); and the non-swiss entity is not and does not intend to be a member of a Swiss exchange. A Swiss branch is deemed to exist where the relevant foreign firm employs people in Switzerland who, permanently and in a professional capacity, in or from this country, trade, maintain client accounts or have the authority to act on behalf of the relevant foreign firm. A Swiss representative office is deemed to exist where the relevant foreign firm employs people who, permanently and in a professional capacity carry on activities, in or from Switzerland, that are not sufficient to indicate a branch such as (i) passing on client mandates or orders or (ii) carrying out representation activities (e.g. advertisement). In addition to this general rule, particular requirements will apply, depending on the service or product offered, as set out below. Place of residence of the client or the prospect The scope of the Swiss licensing requirements will generally be determined by the place in or from which the relevant services are provided. In a cross-border context, this place will generally be deemed to be the place where the relevant customers have their place of residence. Therefore, Swiss licensing requirements will in principle not apply to the marketing of collective investment schemes, consumer loans and insurance products to clients or prospects located outside Switzerland. 201

206 Switzerland 1.2 Specific types of services Consumer credit As per Article 120 of the Swiss Private International Law Act ( PILA ), Swiss law is most likely to be applicable should a financial intermediary provide a consumer credit to a consumer domiciled in Switzerland. Under certain circumstances most notably if the consumer credit is in the range of CHF 500 to CHF 80'000 and if the consumer is not obliged to reimburse the credit within less than three months or in no more than four instalments within one year the Consumer Credit Act ( CCA ) will apply to consumer credits. The CCA sets out a series of mandatory consumer protection rules which cannot be varied to the detriment of the consumer, including the following ones: - the lender must obtain an authorization from the state ("canton") in which it intends to conduct most of its business which will be valid for the whole country (Article 39 CCA); - consumer credit contracts must be made in writing (Articles 9 ff CCA); - consumer credit contracts must list a series of information absent which they are null (Articles 9 ff CCA with 15 CCA). Moreover, as per Article 3 lit. k and n of the Unfair Competition Act ( UCA ), whoever advertises consumer credit opportunities has to clearly state its corporate name, provide clear information as to the net amount, the total cost and the annual interest of the consumer credit and duly draw to the consumer's attention that the granting of a consumer credit is forbidden if it causes excessive indebtedness Introducing brokers A non-swiss broker-dealer must obtain a prior authorization from the Swiss Financial Market Supervisory Authority FINMA ( FINMA ) to act in Switzerland in the following situations: (i) (ii) (iii) (iv) the non-swiss broker-dealer employs staff in Switzerland acting for its benefit, as intermediaries, and transmitting orders to the non-swiss broker-dealer; the non-swiss broker-dealer has a Swiss subsidiary (which does not qualify as a domestic broker-dealer in securities under Swiss law) bearing its corporate name or a similar designation, acting as intermediary transmitting orders to the non-swiss broker-dealer; the non-swiss broker-dealer concludes with a resident of Switzerland, either individual or corporate, an exclusive representation agreement to act as intermediary. The Swiss representative acts as sole representative of the non- Swiss broker-dealer and is remunerated by fees for its intermediation, in general in the form of retrocession; the non-swiss broker-dealer enters into a non-exclusive agreement with a party in Switzerland to act as intermediary, such Swiss intermediary being authorized to use the corporate name of the non-swiss broker-dealer and being remunerated by fees, in general in the form of retrocession. A retrocession is to be understood as any compensation taking the form of a reimbursement of fees. In such cases, the Swiss intermediary would typically 202

207 Switzerland receive from the non-swiss broker-dealer a percentage of the brokerage fee charged by the non-swiss broker dealer to its clients. By contrast, the following situations do not trigger the requirement for a representative office license: (a) (b) (c) the non-swiss broker-dealer enters into a non-exclusive agreement with a party in Switzerland to act as intermediary and does not authorize the intermediary to use its corporate name; there is no specific contractual agreement within the meaning of Sections (i) to (iv) above, between the non-swiss broker-dealer and an intermediary in Switzerland which transmits orders to the non-swiss broker-dealer; and the non-swiss broker-dealer takes orders from existing clients located in Switzerland Insurance products Subject to international agreements, insurance companies domiciled outside of Switzerland are regulated and thus required to obtain an authorization when that they carry out insurance activities targeting Swiss clients, i.e. if a person domiciled in Switzerland is subscribing an insurance agreement or if objects or assets located in Switzerland are insured. Foreign firms carrying out insurance activities in Switzerland are required to establish a branch in Switzerland, which must be managed by an appointed general agent Trust services Generally, trust services may be offered freely on a cross-border basis. Such services will typically include the set-up and the management of offshore companies, trusts, or fiduciary agreements. 2. Cross-border offering of products The offering in Switzerland of equity securities, debt instruments or derivative products is not subject to any approval or authorization, unless they represent interests in collective investment schemes or financial instruments linked thereto (e.g. fund-linked notes), the offering of which in or from Switzerland is subject to specific offering requirements and limitations (see Section 2.1 below). In addition, the offering of collective investment schemes to non-qualified investors is only permissible if authorised by FINMA. The offering of structured products to non-qualified investors is also subject to a special set of rules (see Section 2.2 below). Notwithstanding the above, the public offering of debt instruments (e.g. bonds or notes) or equity securities further presupposes the preparation of a prospectus that meets certain statutory requirements (Section 2.3 below) and, if the securities are listed on the SIX Swiss Exchange, requirements of that exchange. 203

208 Switzerland 2.1 Interests in collective investment schemes Foreign collective investment schemes (thereafter CIS ) and financial instruments linked to CIS that are not registered for public offering in or from Switzerland may still be distributed under the following conditions and within the following limits: Concept of distribution - Any offer or advertisement 1 for CIS which is not exclusively directed towards regulated financial intermediaries is deemed a distribution subject to the Collective Investment Schemes Act, as amended ( CISA ). - A distribution to unregulated qualified investors is subject to certain requirements, but no regulatory approval is required. - The distribution to non-qualified investors in or from Switzerland of shares or units in a foreign CIS requires its prior registration with the Swiss Financial Market Supervisory Authority ("FINMA") Exceptions The provision of information and/or the offer of foreign CIS is not deemed a distribution in the following situations: (1) The provision of information and subscription for CIS shares upon the sole request of the investor and without any intervention or initial contact made by the financial intermediary (reverse solicitation). The unsolicited request exemption is limited to the situations where an investor requires information about or acquires units of a specific CIS without any preliminary intervention or contact from the asset manager, the distributor or the representative of the CIS. If the request does not refer to a specific CIS, the information provided is deemed to constitute a distribution; (2) The provision of information and the subscription for CIS shares in the context of an advisory agreement 2 entered into by the investor with a regulated financial intermediary (e.g. banks, securities dealers, fund management companies) and with independent asset managers; (3) The provision of information and the subscription for CIS shares in the context of a written discretionary management agreement with regulated qualified investors and with independent asset managers (under certain conditions 3 ); (4) The publication of prices, net asset values and tax data by regulated financial intermediaries Qualified Investors 1 Pursuant to the FINMA Circular 2013/09 related to distribution (the Circular ), the distribution concept encompasses any offer (i.e. a concrete offer to subscribe) and any advertisement (i.e. any marketing means aiming at the acquisition of collective investment schemes). The nature and the form of the marketing tools used are irrelevant. 2 Advisory agreements within the meaning of CISA are defined as agreements aiming at a long-term relationship for financial consideration and entered into in writing with regulated financial intermediaries and with independent asset managers (under certain conditions³). 3 The asset manager must be subject to the anti-money laundering regulations, and be governed by the code of conduct issued by a specific industry body, such code of conduct being recognized as the minimum standard by FINMA; the discretionary management agreement must comply with the standards of a specific industry body, such standards being recognized as the minimum standard by FINMA. 204

209 Switzerland Regulated Qualified Investors are: (1) Regulated financial intermediaries such as banks, securities dealers, fund management companies and managers of CIS, as well as central banks; (2) Regulated insurance institutions Unregulated Qualified Investors are: (1) Public entities and retirement benefit institutions (pension funds) with professional treasury management; (2) Companies with professional treasury management; (3) High net worth individuals, if they have declared in writing that they wish to be deemed qualified investors ( opt-in subject to certain conditions as minimum financial assets and technical competences 4 ); and (4) Investors who have concluded a written discretionary asset management agreement 5, provided that (i) they do not exercise their right to "opt-out" of the qualified investors status and (ii) the written discretionary asset agreement is entered into with a regulated financial intermediary, or with an independent asset manager (subject to certain conditions) Requirements applicable in respect of the promotion of a CIS Under the Swiss regime, the following situations have to be considered: (i) (ii) (iii) the offer of shares of a CIS to Regulated Qualified Investors falls outside the scope of the CISA and, as such, is not subject to the legal and regulatory requirements pertaining to the distributors and to the CIS. the offer of shares of a CIS to Unregulated Qualified Investors constitutes a form of distribution. absent any prior registration with FINMA, the shares of a CIS cannot be distributed to non-qualified investors Rules governing the distribution of CIS to Unregulated Qualified Investors Collective investment scheme As mentioned above, should the offer target only Qualified Investors (as defined under Section 2.1.3), the CIS itself does not require an approval by FINMA. 4 Under Article 6 al. 1 CISO, (i) individuals whose assets amount to a minimum of CHF 5,000,000 or (ii) having technical competences in the financial field with assets amounting to a minimum of CHF 500,000 are considered as high net worth individuals. 5 Even though independent asset managers ( IAM ) are not deemed to be qualified investors, distribution activities targeting an IAM are deemed to be addressed to a Qualified Investor provided the IAM undertakes in writing to use the information only for the benefit of its clients that are themselves Qualified Investors according to CISA (FINMA Circular 2013/9). 205

210 Switzerland However, if Unregulated Qualified Investors are targeted, the CIS must appoint a Swiss representative and paying agent (Art. 120 al. 2 lit. d CISA) prior to any distribution activity. Further, the name of the CIS may not be misleading (Art. 120 al. 2 lit. c CISA), in particular in view of their investment policy Swiss representative As indicated, a Swiss representative must be appointed, along with a paying agent. Swiss banking institutions may act both as representative and paying agent. The Swiss representative is to represent the foreign CIS vis-à-vis Swissbased investors and FINMA (Art. 124 CISA). Place of performance will be at the registered office of the representative in case of a litigation with investors (Art. 125 al.1 CISA). Written distribution agreements are required to be entered into with the appointed distributors (Art. 30a al.1 and 131a al.1 CISO). In this context, the representative and the distributors may exclusively use CIS documents bearing the name of the representative and the paying agent, including a jurisdictional clause in favour of Switzerland (Art. 30a al.2 CISO) as well as information on costs, fees, retrocessions and rebates as per the SFAMA Transparency Guidelines 6. Relevant CIS documents are to be made available on request at the representative s office (Art. 131a al.2 CISO). The Swiss representative has no duty of publication nor of regulatory notifications in respect of foreign CIS that are distributed solely to qualified investors Distributor A distributor may not distribute foreign CIS in Switzerland or from Switzerland, to Unregulated Qualified Investors, unless it is subject, in Switzerland or in its home jurisdiction, to an appropriate supervision (Art.19 al.1bis CISA). This requirement comes in addition to the requirement of a Swiss representative and paying agent. Further, the distributor is to enter into a written distribution agreement with the Swiss representative of the CIS (Art. 30a CISO). Foreign-based distributors must comply with the SFAMA Provisions for Distributors which must be incorporated in the distribution agreement. 7 Marketing activities via websites are subject to similar rules which are provided for in the Circular. If a website refers to non-registered CIS and is 6 The Swiss Fund and Asset Management Association ( SFAMA ) issued on May 22, 2014, its revised Guidelines on Duties Regarding the Charging and Use of Fees and Costs ( Transparency Guidelines ) which are applicable to Swiss representatives of foreign CIS and to distributors (Swiss or foreign) of these CIS in Switzerland by their incorporation by reference in the distribution agreement entered into with the Swiss representative. 7 The SFAMA issued on May 22, 2014, its revised Guidelines on the Distribution of Collective Investment Schemes ( Distribution Guidelines ). The Provisions for Distributors included in the annex of the Distribution Guidelines are applicable to all distributors, including foreignbased distributors. 206

211 Switzerland deemed to target Qualified Investors in Switzerland, it needs to include a specific disclaimer or appropriate restriction access. Further, the foreign entity responsible for the website must be a financial intermediary holding a distributor licence in its home jurisdiction and have a distribution agreement with the Swiss representative of the relevant funds. Further, any marketing document referring to CIS must indicate the name of the Swiss representative, the Swiss paying agent and the Swiss jurisdiction, subject to the transitional period (see Section below). 2.2 Structured products In a nutshell, under the CISA, structured products can be offered to non-qualified investors in or from Switzerland without any regulatory approval or registration if the following conditions are met: (A) the structured products are issued, guaranteed or distributed either: (1) by a Swiss regulated financial institution, such as a bank, an insurance company or a securities dealer (Article 5 (1)(a)(1)-(3) CISA); or (2) a foreign regulated financial institution (i) subject to a prudential supervision that is equivalent to the Swiss one and (ii) which has an establishment in Switzerland (Article 5 (1)(a)(4) CISA and Article 4 (1)(b) CISO, the implementing ordinance for CISA) ; and (B) a simplified prospectus is issued in relation to the structured products being offered (Article 5 (1)(b) CISA). Structured products that meet the above requirements fall outside the scope of the CISA, except in situations that would constitute a clear circumvention of the law, in particular where they lead to an (indirect) offering to non-qualified investors of an unregistered CIS (e.g. feeder structure for an unregistered hedge fund). 2.3 Debt or equity securities Participations that would qualify as securities (i.e. issued by a corporate entity, whether shares or other equity or debt instruments) are subject to a prospectus requirement if they are to be publicly offered for subscription, unless (i) the offer is made to a limited circle of offerees (as a rule of thumb this is construed as meaning less than twenty (20) offerees) and (ii) no public press announcement or similar publicity is made in Switzerland. The status or sophistication of the offerees is irrelevant. As a general rule, any publication of advertising materials for newly issued shares also triggers a prospectus requirement. This requirement applies separately and in addition to the requirements applicable to the offering of interests in CIS described under above. A breach of the prospectus requirement, if applicable, may trigger the liability of its authors for the prejudice thus caused (Article 752 and 1156(3) of the Swiss Code of Obligations ( CO )). 207

212 Switzerland Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. There is no restriction on the attendance of seminars, conferences and other relevant industry events in Switzerland by the Manager. (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. Yes, in the context of cross-border marketing of services, speaking at seminars, conferences and other relevant industry events is permitted. In respect to the offering of products, depending on the type of products offered, additional limitations will apply (see Section 2 of the Introduction). (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? Yes, in the context of cross-border marketing of services, sponsoring seminars, conferences and other relevant industry events (as primary sponsor or as only one of a number of sponsors) is permitted. In respect to the offering of products, depending on the type of products offered, additional limitations will apply (see Section 2 of the Introduction). (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. Yes, provided the conditions set out in Sections 1 and 2 of the Introduction are met. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) (iii) general information about the Manager; publications of the Manager that are educational in nature or general market commentary only; 208

213 Switzerland (iv) (v) the website address of the Manager; other information about the Manager and its services and products. Yes, provided the conditions set out in Sections 1 and 2 of the Introduction are met. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. Yes, provided the conditions set out in Sections 1 and 2 of the Introduction are met. (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. Yes. If the invitation is made in Switzerland, the conditions set out in Sections 1 and 2 of the Introduction must be met. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. Services In the context of cross-border marketing of services, cold calling is permitted. The only limitations on cold calls are the manner in which they are performed (e.g. restrictions on automated mass mailings) 8 and the privacy of the contacted persons 9. 8 Pursuant to Article 3 lit. o of the Unfair Competition Act ("UCA"), financial intermediaries may not send or have someone send by means of telecommunication (i.e. transmission of information by way of electric, magnetic, optical or electromagnetic signals) mass advertisement (i.e. every type of advertisement executed automatically, i.e. without human intervention, be it an automatic telephone call, a fax, a text message or an ) bearing no direct relation whatsoever to information requested unless they have (i) obtained the clients' prior consent ("opt-in"), (ii) correctly indicated the financial intermediary s contact details and (iii) duly informed the clients of their right to refuse it easily and free of charge (right to "opt out"). Further, commercial information sent to clients must not violate their privacy, nor use abusive, misleading or unfair methods. 9 It is assumed that no automatic telephone calls will be carried out, i.e. the prospect client will eventually interact during the call with a human interlocutor. Pursuant to Article 88(1) of the Ordinance on the Telecommunication Services ("OTS"), unsolicited commercial telephone calls ( cold calls ), are per se legal unless people have expressly opposed to such phone calls ("opt-out"), for instance by adding a special notice to their entry in the directories. That being said, commercial telephone calls must in any event not violate the client s privacy, nor use abusive, misleading or unfair methods such as, for instance, any particularly aggressive method having a potential to impede the freedom of decision of the client which would be illegal as per Article 3 lit. h UCA. 209

214 Switzerland Products In respect to the offering of products, additional limitations will apply depending on the type of products. In particular, unsolicited calls to investors, other than Qualified Investors (as per Section 2.1 above) to offer the Fund, are deemed to constitute a distribution to non-qualified investors and are thus prohibited unless the Fund has been authorised by FINMA. Unsolicited calls to Unregulated Qualified Investors are subject to the conditions set out under Section above. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? The Manager may undertake any type of general marketing activities in Switzerland, provided the conditions set out in Sections 1 and 2 of the Introduction are met. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? The Manager may undertake any type of general marketing activities from outside Switzerland, provided the conditions set out in Sections 1 and 2 of the Introduction are met if the target and investors are in Switzerland. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? From a regulatory perspective, there is no permitted or recommended maximum number of days the Manager may spend in Switzerland to promote financial products or services. The frequency of such stays should however be limited failing which a risk exists that FINMA considers that the offer is no longer of a cross border nature. Further, the Manager should avoid being deemed to have a permanent establishment in the form of a branch or representative office. From an immigration law perspective: The following restrictions to the employees of the Manager apply: (i) Swiss nationals: no limit (ii) EU nationals: right to perform a gainful activity in Switzerland (a) without any authorization (until 8 days per calendar year), (b) subject to prior announcement (until 90 days per calendar year), (c) subject to prior authorization (above 90 days per calendar year). (iii) non EU nationals: (a) right to carry out a gainful activity without employment in Switzerland without any authorization until 8 days per calendar year, (b) subject to prior authorization (if more than 8 days per calendar year); in addition, (i) depending on the nationality, an entry visa is required even for a stay of 8 days; (ii) in any case, a business visa is required for a stay longer than 8 days. 210

215 Switzerland Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Generally, investors in Switzerland are permitted to appoint an offshore investment manager to manage a segregated mandate. Additional restrictions and requirements apply when the investor is a Swiss CIS. In particular, a Swiss CIS may only appoint an asset manager that is subject to a supervision recognised by FINMA. Additional restrictions and requirements also apply to pension schemes. Swiss pension schemes may only appoint as external asset managers financial intermediaries that are subject to official supervision in Switzerland or abroad. The regulation can be summarized as follows: The management of Swiss pension schemes portfolio may be delegated to: (i) banks; (ii) broker-dealers; (iii) fund management companies / funds investment managers; (iv) insurance companies registered with FINMA; (v) Swiss pension plans supervised by a cantonal supervisory authority; (vi) investments foundation; (vii) public insurance companies; or (viii) foreign financial intermediaries which are subject to the supervision of a foreign regulator. The criteria relating to the foreign supervision is subject to regulations issued by the Pension Funds High Supervisory Authority. To date, the High Supervisory Authority has not issued yet any guidance in this respect. Upon request, the High Supervisory Commission can allow the delegation of the management of pension fund assets to persons / institutions which do not meet the above-mentioned categories (no licence / no supervision) provided they offer all guarantees that (i) they will act with diligence and (ii) they have the required competences to manage these assets. The authorisation is valid for a period of three years. If the answer to the above question is no, please go to Part III. 211

216 Switzerland 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? If the marketing activities target investors in Switzerland, the restrictions mentioned in the Introduction apply. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, under the above mentioned restrictions on the offering of products and services. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, the Manager can respond to a request for proposal. Whether the request for proposal is private or public is not relevant. 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Yes, under the above mentioned restrictions on the offering of products and services. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Yes, under the above mentioned restrictions on the offering of products and services. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? There is no requirement that the agreement be in a particular language. 212

217 Switzerland (b) can the agreement be governed by a law other than the laws of the Jurisdiction? There is no legal requirement that the agreement be governed by Swiss law, unless the investor is a Swiss CIS. When an investment management agreement is entered into by a Swiss CIS with an offshore manager, the applicable self-regulatory rules require that the agreement is governed by Swiss law. Investment management agreements entered into by a Swiss pension scheme are not required to be governed by Swiss law. That being said, the investment manager will be required to comply with certain investment rules and restrictions. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? There are no particular requirements, unless the investor is a Swiss CIS. When an investment management agreement is entered into by a Swiss CIS with an offshore manager, specific legal, regulatory and self-regulatory rules will apply. In particular, the agreement must include a reference to the applicable legal, regulatory and self-regulatory frame; the Manager must comply with the applicable code of conduct; the investment policy followed must comply with the applicable rules. The investment management agreement entered into by a Swiss pension scheme must meet the requirements laid down in section III, let. A, of the FINMA Circular 2009/1 «Guidelines on asset management». Further, Swiss pension schemes tend to include the relevant Swiss rules in the investment management agreement, although there is no legal requirement to do so. 213

218 Switzerland Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. There is no legal or regulatory prohibition or restriction for investors in Switzerland as regards Fund investments. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. (a) The Fund does not need to be authorised or registered in Switzerland in order for it to be offered in a non-public offering. Please refer to Section 2.1 in the Introduction for the definition of a non-public offering. (b) Under the Swiss distribution rules, only Qualified Investors may be approached. If Unregulated Qualified Investors are approached, additional conditions and requirements apply. Please refer to Section 2.1 in the Introduction for the definition of Qualified Investors and to Section and in the Introduction for the additional conditions and requirements. (c) There is no restriction on the number of prospective investors that may be approached, provided the rules set out in the Introduction are complied with. (d) There is no minimum investment amount under the distribution rules. (e) Swiss law does not require the inclusion of any selling restriction language in the offering documentation related to foreign CIS. Assuming that the marketing in Switzerland is limited to a distribution to Qualified Investors, it is recommended to include a selling legend in the offering documents and marketing materials. It is to be noted that the use of the recommended selling legend would not have any impact from a regulatory perspective in the event an unauthorised distribution is in fact taking place. Please refer to Appendix A for the selling legends to be used. (f) CIS documents handed over to Swiss Unregulated Qualified Investors must provide information on costs, fees, retrocessions and rebates and any marketing document referring to CIS must indicate the name of the Swiss representative, the Swiss paying agent and the Swiss jurisdiction (please refer to Introduction, section ). 10 The below rules entered into force on 1 March

219 Switzerland 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? Not applicable. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Please refer to the Introduction. Furthermore, marketing activities via websites are subject to specific rules which are provided for in the Circular. A website aiming at the acquisition of shares of CIS and containing references to Switzerland (e.g. the website targets Swiss investors, there is a contact in Switzerland, there are references to the Swiss legislation) is viewed as entailing a distribution in Switzerland for the CIS referred to in the website. In such an instance, if the website refers to non-registered CIS and thus targets Qualified Investors in Switzerland, it must include a specific disclaimer or appropriate restriction access. If the website is deemed to target Unregulated Qualified Investors, the foreign entity responsible for the website must be a financial intermediary holding a distributor licence in its home jurisdiction and enter into a distribution agreement with the Swiss representative of the relevant CIS. Further, the CIS documents must provide information on costs, fees, retrocessions and rebates and any marketing document referring to CIS must indicate the name of the Swiss representative, the Swiss paying agent and the Swiss jurisdiction. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? Yes, within the limits of the distribution rules (please refer to Section 2.1 above). 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? As a general rule, an agency agreement without exclusivity and where the agent is not empowered to represent the Manager should not create a permanent establishment of the Manager in Switzerland. Consequently, no licences or approvals are required by the local agent, provided the activities conducted are not deemed distribution. If a local agent is appointed to market the Fund to prospective investors in Switzerland, the Manager may, depending upon the terms of the agreement (e.g. exclusivity, authority to commit the Manager, etc.) be viewed as having a permanent local presence in Switzerland in the form of a representative office or a branch office. The marketing of the Fund in Switzerland would no longer 215

220 Switzerland be viewed as conducted on a cross-border basis. This would, as the case may be, trigger the need for the local partner to register with the Swiss trade registry as the branch of the Manager, and to comply with the relevant legal and tax requirements. Further, any distribution to Unregulated Qualified Investors triggers the requirement, for the distributor, to be subject to an appropriate supervision in Switzerland or in its home jurisdiction. Please refer to Section If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? If a local agent is appointed to market the Fund to prospective investors, representatives of the Fund or of the Manager can still accompany the local agent to meet with prospective investors, provided the distribution rules set out in the Introduction are complied with. The distribution in Switzerland of the funds to Unregulated Qualified Investors is permissible only to the extent that (1) the distribution activities are made exclusively to and directed at Qualified Investors (i.e., are not accessible to and do not target non-qualified investors); (2) any distribution is made through the channels that are usual in the market of Qualified Investors (e.g. one-toone contacts, road shows, etc.), without any advertising being made to the general public. All forms of direct and indirect marketing of collective investments (i.e. public advertisement, mass mailing, NAV publication, cold calls, road shows etc.) are therefore prohibited, unless being made exclusively to Qualified Investors. Distribution to Unregulated Qualified Investors is subject to the regulatory requirements mentioned in the Introduction. It is further to be noted that the publication of subscription prices, NAV and similar information, including tax values, is permitted, provided it is made by regulated financial intermediaries, and the publication contains no contact details (Article 3 (5) CISO). 8. Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes provided the conditions set out in are met. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes provided the conditions set out in are met. 216

221 Switzerland 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? If the investor in Switzerland is a Regulated Qualified Investor, the Manager can give information about the Fund in response to a request for proposal, be the request private or public. If the prospective investor is an Unregulated Qualified Investor, additional requirements apply as per the Introduction, unless the investor requires information specifically about the Fund (reverse solicitation). If the investor in Switzerland is not a Qualified Investor, the Manager cannot give information about the Fund in response to a request for proposal, unless the investor requires information specifically about the Fund (reverse solicitation). Providing information on the Fund following a generic query would be considered advertising and would amount to a prohibited offering to non-qualified investors. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? If the prospective investor in Switzerland is a Regulated Qualified Investor, the Manager can meet with the investor to discuss the Fund at the request of that investor. If the prospective investor is an Unregulated Qualified Investor, additional requirements apply as per the Introduction, unless the investor requires information specifically about the Fund (reverse solicitation). If the prospective investor in Switzerland is a not Qualified Investor, the Manager can meet with the investor to discuss the Fund at the request of that investor, provided the investor requires information specifically about the Fund. Discussing the Fund following a generic query would be considered advertising and would amount to a prohibited offering to non-qualified investors. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? If the prospective investor in Switzerland is a Regulated Qualified Investor, the Manager can attend a beauty parade or finals presentation in Switzerland in order to discuss the Fund at the request of such investor. If the prospective investor is an Unregulated Qualified Investor, additional requirements apply as per the Introduction, unless the investor requires information specifically about the Fund (reverse solicitation). If the prospective investor in Switzerland is a not Qualified Investor, the Manager cannot attend a beauty parade or finals presentation in Switzerland in order to discuss the Fund at the request of such investor, unless the investor requires information specifically about the Fund. Providing information on the Fund following a generic query would be considered advertising and would amount to a prohibited offering to non-qualified investors. 217

222 Switzerland 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? No. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? The answers to the above questions in this Part III would be the same if the shares in the Fund were listed on a foreign stock exchange. The listing on a foreign exchange is not relevant to the distribution rules. (b) the Fund was structured as a unit trust rather than as a company? The answers to the above questions in this Part III would be the same if the Fund was structured as a unit trust, rather than as a company. The distribution rules apply to all foreign CIS, which are defined in the CISA as comprising all forms of collective investments, regardless of their legal form and structure (e.g. open or close-ended, corporate or contractual), which are established and managed from outside Switzerland (Article 119 CISA). (c) the Fund was structured as a limited partnership rather than as a company? Same answer as (b). (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? The answers to the above questions in this Part III would be the same if the Fund was a fund of funds that invests in other investment funds. The way the investment policy is implemented is not relevant to the distribution rules. 218

223 Switzerland (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? Same answer as (b). 219

224 Switzerland Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? There are no particular restrictions on the information the Manager can send to an existing client in Switzerland in relation to the client s investment portfolio or investment in the Fund. It is however assumed that the client has given his/her prior consent to receiving mail. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes. 220

225 Switzerland Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? Financial Market Supervisory Authority ( FINMA ), Bern, Switzerland. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? The applicable legal and regulatory framework in this matter is the Collective Investment Schemes Act of June 23, 2006, as amended ("CISA") and its implementing ordinance of November 22, 2006, as amended ("CISO"). 221

226 Switzerland Appendix A - Swiss selling legends DISTRIBUTION TO REGULATED QUALIFIED INVESTORS Notice to investors in Switzerland The distribution of [Shares / Units / Interests] in Switzerland will be exclusively made to, and directed at, regulated qualified investors (the "Regulated Qualified Investors"), as defined in Article 10(3)(a) and (b) of the Swiss Collective Investment Schemes Act of 23 June 2006, as amended ("CISA"). Accordingly, the [Company / Fund / Partnership] has not been and will not be registered with the Swiss Financial Market Supervisory Authority ("FINMA") and no Swiss representative or paying agent has been or will be appointed in Switzerland. This [Private Placement Memorandum] and/or any other offering materials relating to the [Shares / Units / Interests] may be made available in Switzerland solely to Regulated Qualified Investors. DISTRIBUTION TO QUALIFIED INVESTORS Notice to investors in Switzerland The distribution of [Shares / Units / Interests] in Switzerland will be exclusively made to, and directed at, qualified investors (the "Qualified Investors"), as defined in the Swiss Collective Investment Schemes Act of 23 June 2006, as amended ("CISA") and its implementing ordinance. Accordingly, the [Company / Fund / Partnership] has not been and will not be registered with the Swiss Financial Market Supervisory Authority ("FINMA"). This [Private Placement Memorandum] and/or any other offering materials relating to the [Shares / Units / Interests] [that have been approved by the Swiss representative] may be made available in Switzerland solely [by the Swiss representative and/or authorised distributors] to Qualified Investors. [Swiss representative: Swiss paying agent: Jurisdiction: [full details] [full details] [registered office of the Swiss representative]] 222

227 United States of America Questionnaire for United States of America (the Jurisdiction or the US ) Law Firm: Morgan, Lewis & Bockius, LLP Website: Lawyer: Ethan Johnson Telephone: Date: 31 October ejohnson@morganlewis.com In this questionnaire: Fund Manager means an open-ended offshore fund structured as a company that: (a) is managed by the Manager or an affiliate; (b) is not registered or authorised in the Jurisdiction for public sale; and (c) either invests directly in investments or invests substantially all its assets in a master fund. means an offshore investment manager that is not licensed or registered in the Jurisdiction and that does not have a physical presence in the Jurisdiction. Whilst every effort has been made to ensure the accuracy of this questionnaire, it is for general guidance only and should not be treated as a substitute for specific advice. If you would like advice on any of the issues raised, please speak to the contact listed above. 223

228 United States of America Part I General Cross-Border Marketing Activities 1. Please indicate which of the following activities the Manager is permitted to undertake. If any activity is permitted subject to restrictions, please describe those restrictions. (a) Attend seminars, conferences and other relevant industry events in the Jurisdiction. The question is whether attendance at such events constitutes promoting the Manager s investment services to the public in the US thus requiring the Manager to register with the SEC. Mere attendance should not create a problem. The Manager should not be a sponsor of the event, but may hand out a limited number of business cards. This conclusion may depend upon the size of the conference. A conference with 10,000 participants creates different issues than a conference of 300 participants. It should be noted that a non-us Manager may manage investments for US persons without registration with the SEC as an investment adviser as long as the Manager does not hold itself out to the public in the US as providing investment advice, does not maintain a place of business in the US, manages less than US$25 million from clients and private fund investors that are US persons and has fewer than 15 clients and private fund investors that are US persons. A non- US Manager that has no clients that are US persons but that manages one or more private funds with total assets of US$150 million that has US person investors (a private fund manager ) will generally only need to register with the SEC if the Manager manages the funds from a location in the US. A foreign private fund manager or adviser is not subject to the same limitations on holding itself out to the public in the US and may more actively attend and participate in industry events in the US. Note that a private fund manager with 15 or more US person investors in the private fund manager s private funds or US $25 million of fund AUM from US persons may still need to file with the SEC Part 1A of Form ADV as an exempt reporting adviser. The term US person is defined under Regulation S of the Securities Act of 1933 and generally means residents of the US (regardless of citizenship). (b) Speak at seminars, conferences and other relevant industry events in the Jurisdiction. The Manager should be able to speak at conferences on general economic and investment matters but should not describe his or her strategy or experience or otherwise promote the Manager s investment services other than indirectly through the quality of his or her presentation. Again, a private fund manager may attend conferences in the US and speak more freely since the private fund manager s SEC exemption does not depend upon it avoid holding itself out to the public in the US. (c) Sponsor seminars, conferences and other relevant industry events in the Jurisdiction. Does it make a difference if the Manager is the primary sponsor or only one of a number of sponsors? 224

229 United States of America As noted above in (a), the Manager (other than a private fund manager) should not sponsor industry events in the US. Analytically it would not make a difference that the sponsor is one of a number of sponsors. Practically, if there are many other sponsors it certainly reduces the view that the Manager is promoting its investment services to the public. Again, the size of the conference will make a difference for Managers other than private fund managers. (d) Whilst in the Jurisdiction, give to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. The answer again here will vary on the size of the conference. In a large very public setting we would recommend limiting the handouts to business cards. In a more intimate setting items (i) through (vi) would probably be okay. Note that the Manager s website and any distributed materials should clearly state that they are for the exclusive use of non-us persons. Again, a private fund manager need not limit the information he hands out except, as explained later, with respect to the private fund manager s private funds. (e) From outside the Jurisdiction, send to people the Manager meets at seminars, conferences and other relevant industry events in the Jurisdiction: (i) business cards; (ii) general information about the Manager; (iii) publications of the Manager that are educational in nature or general market commentary only; (iv) the website address of the Manager; (v) other information about the Manager and its services and products. The fact that these items are delivered from outside of the jurisdiction will not change the answer in (d) above. The Manager should keep the materials sent into the US to a minimum and target a limited number of addressees. Include disclosure on all materials that they are intended for the exclusive use of non- US persons. (f) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment in the Jurisdiction. These activities should not be considered public promotion as long as they are limited to small isolated events with no sponsorship or promotion. For example, it would be acceptable to the Manager to take 5 or 6 people to a basketball game in New York. It would not be acceptable to have the scoreboard display a welcome sign to the Manager. 225

230 United States of America (g) Invite (and pay for) people in the Jurisdiction to attend lunches, dinners, sporting events, theatrical shows and other entertainment outside the Jurisdiction. The analysis is largely the same as in (f) above, but note that we would not object to the promotional aspects since that promotion will not be occurring in the US. 2. Does the Jurisdiction have restrictions on cold calling e.g. communicating with a prospective investor face-to-face, by telephone, etc where the prospective investor has not requested the communication? If yes, please describe the restrictions. There are no restrictions in the US on cold calling with respect to the provisions of investment management or advisory services as long as the cold calls are made on an isolated, infrequent basis. Accordingly, the direct solicitation of advisory or management services without public promotion should not be a problem. Note that some states in the US have their own laws limiting the solicitation of management services to retail clients or even to high net worth persons. Almost every state permits solicitation of institutional clients. Some states require solicitors to register or file notices with the state authorities. As discussed in Part III below, there are strict limitations on direct solicitation of fund sales. 3. Are there any other general marketing activities that the Manager is permitted to undertake in the Jurisdiction? See previous responses. Isolated contacts are permitted but general solicitation may require SEC or state registration other than for private fund managers. The marketing process does not trigger SEC registration as long as the Manager is not marketing to the public in the US. Registration turns more on the location of the Manager and the number of its US clients. 4. Are there any other general marketing activities that the Manager is permitted to undertake from outside the Jurisdiction in relation to people who are in the Jurisdiction? General marketing activities outside of the US that target the US or definable groups of US citizens outside of the US (such as US citizens residing on a US military base outside of the US) would be considered the same as marketing within the US, and thus would require SEC registration for the Manager. 5. Are there any restrictions on how frequently representatives of the Manager can (or should) visit the Jurisdiction e.g. personal or corporate tax? Under the substantial presence test, a non-citizen will be treated as a resident for US tax purposes if he has been present in the US on at least 183 days during a three-year period that includes the current year. Being present 226

231 United States of America in the US for just one hour of a day will cause that entire day to count for purposes of the substantial presence test. Each day of presence in the current year is counted as a full day. Each day of presence in the first preceding year is counted as one-third of a day and each day of presence in the second preceding year is counted as one-sixth of a day. (When doing this calculation, fractional days are not rounded up or down to the nearest whole number.) In general, this means that an individual may spend approximately 120 days per annum in the US, indefinitely, without becoming a resident for tax purposes. Certain days of presence in the US do not count for purposes of the substantial presence test. There are two special rules to bear in mind: If an individual is not physically present for more than 30 days during the current year, the substantial presence will not be applied for the current year, even if the three-year total is 183 days or more. This thirty-one day minimum rule does not apply to the first or second year preceding the current year. Of more importance for you, however, is the closer connection exception. An individual who meets the substantial presence test may, nevertheless, be considered a nonresident alien for a current tax year if he meets certain conditions: (a) the individual is present in the US for fewer than 183 days in the current year; (b) the individual maintains a tax home in a foreign country during the current year; and (c) generally, the individual has a closer connection during the current year to a single foreign country in which he maintains a tax home than to the US. Generally, a non-citizen s tax home will be considered to be located at the place of the non-citizen s regular or principal business. If the non-citizen is not considered to have a regular or principal place of business because of the nature of his business, the tax home will be his place of abode in a real and substantial sense. The factors which would be considered in determining whether a non-citizen has a closer connection to another country than to the US include: The location of his permanent home; The location of his family; The location of his and his family s personal belongings, such as automobiles, furniture, clothing, jewellery; The location of social, political, cultural or religious organizations with which he has a current relationship; The location where he conducts his routine personal banking activities; The location where he conducts business activities other than those activities which determine his tax home; Where he holds a driving license; Where he votes; and The country of residence he designates on official forms and documents. The difficulty with relying on having a closer connection to a foreign country is that the closer connection exception must be claimed on a formal statement to the authorities. On the other hand, if a non-citizen does not exceed the days permitted under the substantial presence test, no submission must be made to the US authorities. Treaties between the US and some countries may override these general principles. 227

232 United States of America Part II Cross-Border Marketing of Investment Management Services 1. Are investors in the Jurisdiction permitted to appoint an offshore investment manager to manage a segregated mandate? If only certain categories of investor are permitted to do so, please describe those categories. Non-US Managers are generally permitted to accept unsolicited US clients without having to register with the SEC as long as the Manager does not maintain a place of business in the US, does not hold itself out to the public in the US as an investment manager, manages less than US$25 million from US clients and investors in the Manager s private funds and has fewer than 15 US clients and investors in the Manager s private funds. The Manager would have to limit the solicitation of additional business from such clients. The type of the person does not directly control this result however it is generally best to limit those clients to institutional investors. If the answer to the above question is no, please go to Part III. 2. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Jurisdiction? Marketing activities conducted outside of the jurisdiction with respect to prospective clients in the jurisdiction are subject to SEC jurisdiction just as though those activities were undertaken by a Manager physically present in the US. 3. Can the Manager provide details of its investment management services in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes, as long as the request was truly unsolicited. The SEC defines solicitation quite broadly and many activities will be considered solicitation such as issuing publications in media in circulation in the US and maintaining an unrestricted website. 4. Can the Manager respond to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, they can respond to RFPs and it doesn t make a difference whether the RFP is public or private. Again, the Manager will still have to register with the SEC once it exceeds the various thresholds described above or holds itself out to the public in the US. Again, this does not apply to private fund managers. 228

233 United States of America 5. Can the Manager meet with a prospective investor in the Jurisdiction to discuss the Manager s investment management services at the request of that prospective investor? Generally such meetings at the request of US prospects would not be considered promotion. The Manager would have to be careful not to conduct any of the prohibited public promotion described above in connection with such visits to the US. The resulting client relationships will nevertheless be considered US clients and may require the Manager to register with the SEC under the Advisers Act if the size of the account or number of US clients exceeds the registration thresholds under the Advisers Act as described above. 6. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction to discuss the Manager s investment management services at the request of a prospective investor? Yes. The resulting client relationships will nevertheless be considered US clients and may require the Manager to register with the SEC under the Advisers Act if the size of the account or number of US clients exceeds the registration thresholds under the Advisers Act as described above. 7. If an investor in the Jurisdiction enters into an agreement appointing the Manager to provide investment management services: (a) is there a requirement that the agreement be in a particular language? There are no such language requirements. (b) can the agreement be governed by a law other than the laws of the Jurisdiction? Yes, the agreement may be governed by laws of another jurisdiction. Certain US clients such as state pension funds may have internal requirements regarding governing law in management agreements. (c) are there any other provisions that must be included in the agreement as a result of regulatory requirements in the Jurisdiction? In general no, although there are several traditional provisions that are used. The Advisers Act and the SEC require Managers that are registered with the SEC (or unregistered but required to be registered) to (i) restrict assignability of their management agreements without client approval, (ii) permit clients to terminate their agreements (note that there is no specific notice requirement under the Advisers Act but we generally advise that the notice requirement not be longer than 90 days), and (iii) avoid indemnifying the Manager against violations of US federal securities laws. 229

234 United States of America Part III Cross-Border Marketing of Unregistered Offshore Funds Non-Public Offering 1. Are investors in the Jurisdiction permitted to invest in the Fund? If only certain categories of investor are permitted to do so, please describe those categories. There are no prohibitions on residents of the US investing in non-us funds. The primary US regulatory concerns facing the promoter of a non-us fund relate to whether the fund must be registered with the SEC and whether the fund has tax attributes that are appropriate for taxable and tax-exempt US investors. As described below in the next Item, there are certain exemptions from SEC-registration under the Investment Company Act that depend on the financial resources of investors that are US persons. If the answer to the above question is no, please go to Part IV. 2. Please describe the requirements for a non-public offering of the Fund in the Jurisdiction, including (where applicable): (a) whether the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering; (b) the types of prospective investors that may be approached; (c) the number of prospective investors that may be approached; (d) the minimum investment amount; and (e) recommended or required disclaimers in offering documents and marketing materials. Briefly, funds must register with the SEC if they are conducting a public offering in the US. Public offering under the Securities Act of 1933 generally means an offering conducted through a public media, such as newspapers or an unrestricted internet website, or where the offeror and offeree have no preexisting relationship. However, the principles governing whether or not an offering has been made to the public in the US has changed significantly due to the adoption of the Jumpstart Our Business Startups Act (the JOBS Act ). The JOBS Act has made it easier for funds in the US to raise capital in the US by permitting funds and other issuers to solicit the public in the US under certain circumstances. The SEC has adopted regulations implementing the general solicitation relaxation provisions of the JOBS Act. The SEC has amended Regulation D and added Rule 506(c) permitting funds to be offered in the US through the Internet, media or other public platforms that will allow the funds to reach a larger US investor audience than would be permitted by traditional private placement offerings. A fund conducting a Rule 506(c) offering will have to take reasonable steps to verify that the US persons subscribing to the fund are all "accredited investors". Merely relying on a subscriber questionnaire will no longer be adequate for this verification for an offering under Rule 506(c). Sales in the US in Rule 506(c) offerings may only be made to accredited investors. The SEC has explained that a fund using Rule 506(c) must make an objective determination whether it has taken reasonable steps to verify that sales are being made only to accredited investors. According to the SEC, a fund will not be considered to have taken reasonable steps to verify accredited 230

235 United States of America investor status if it requires only that a subscriber tick a box in a questionnaire, absent other information about the purchaser indicating accredited investor status. The definition of accredited investor remains unchanged. The SEC has provided a non-exclusive list of ways for funds to satisfy the verification requirements. The accredited investor status of a corporation, partnership or other entity may be verified through financial statements, regulatory filings and the like. For natural persons: A fund may review tax returns for the two most recent years to determine whether the person satisfies the income test. The fund should also obtain a written representation from the subscriber confirming that the subscriber expects to reach the required income level during the current year. A fund may consider the following to determine if a subscriber s net worth qualifies him or her as an accredited investor: (i) for assets, bank statements, brokerage statements or other statements of securities holdings, tax assessments and independent appraisal reports, and (ii) for liabilities, a consumer credit report. The fund should also obtain written confirmation from the purchaser that all liabilities necessary to make the net worth determination have been disclosed. A fund may rely on a written confirmation from an SEC-registered brokerdealer or investment adviser, a licensed attorney or certified public accountant in good standing, that the purchaser is an accredited investor. If a person who purchased securities as an accredited investor prior to the effective date of Rule 506(c) wishes to purchase additional securities in a Rule 506(c) offering, the fund may rely on a written certification that the subscriber still qualifies as an accredited investor. Rule 506 under Regulation D prohibits an issuer from relying on Rule 506 when making a private offering if the issuer or certain other covered persons of the issuer have been the subject of a disqualifying event. This is commonly referred to as the Bad Actor rule. Issuers making a private offering of their securities in reliance on Rule 506 must determine who their covered persons are, whether any of their covered persons have been subject to a disqualifying event and, if so, whether an exception from the prohibition is available. Among the universe of covered persons of an issuer are certain affiliated issuers; an issuer s directors, executive officers, officers who participate in the offering and general partner/managing member; investors with at least a 20% beneficial ownership of the issuer s voting equity securities; promoters connected with the issuer; investment manager of the issuer; paid solicitors and placement agents used by an issuer; the general partners/managing members of an issuer s investment manager and solicitors; and the directors, executive officers or officers who participate in the offering of the investment manager, solicitor, or their general partners/managing members. Disqualifying events include certain US felonies, misdemeanors, court orders, final regulatory orders, SEC orders, industry suspensions or US postal service false representation orders, which generally must involve some fraud, the purchase or sale of securities, regulatory filings or conduct in a financial services business. Generally, the applicable look-back period is either five or ten years, or the period for which the applicable order is in effect. 231

236 United States of America The rules include an exception for issuers who do not know and in the exercise of reasonable care could not have known that a disqualification existed. As such, due diligence processes will become of key importance for issuers relying on Rule 506 to engage in private offerings of their securities. What processes an issuer should undertake to best secure the due diligence exception depends on the facts and circumstances of the particular issuer. The SEC has indicated that for continuous offerings, such as hedge funds, reasonable care include updating the factual inquiry on a reasonable basis. Private funds will likely engage in some combination of contractual covenants from investors and service providers to provide bring-downs of representations, initial investor questionnaires and periodic certifications, negative consent letters and perhaps even checking of public databases for disqualifying events. The SEC may provide issuers with a waiver upon a showing of good cause, although we expect those instances to be rare. For disqualifying events that occurred during a look-back period but before September 23, 2013, issuers will have a disclosure obligation to inform their investors. The SEC has explained that a fund conducting a valid Rule 506(c) offering would not be considered to be conducting a public offering. Nonetheless, under the Investment Company Act a fund may still need to be registered with the SEC if it has a large number of investors, even if it is not actually marketed to the public. In this regard, Congress has developed a number of exemptions for funds under the Investment Company Act that permit a fund to determine with a large degree of certainty whether the fund is required to register with the SEC. The two principal exemptions are Sections 3(c)(1) and 3(c)(7) of the Investment Company Act. Under Section 3(c)(1), a foreign fund that is not conducting a public offering in the US may have up to 100 US investors. This exemption does not require any qualification for the investors, although the private placement rules under the Securities Act of 1933 generally require that the offering only be made to accredited investors. This has not changed as a result of the JOBS Act although funds using Rule 506(c) under the JOBS Act must take reasonable steps to verify that all US person investors are accredited investors. The term accredited investor is defined below. Under Section 3(c)(7), the fund may have up to 1,999 US investors as long as each investor is a qualified purchaser or knowledgeable employee and the fund is not conducting a public offering in the US. An accredited investor is generally an individual with US $1 million of net worth, excluding his or her primary residence and subject to other adjustments, or US$200,000 (US$300,000 jointly with a spouse) in annual income for the last 2 years and a reasonable expectation of having at least that much income in the current year. A company, trust, or other institutional investor will generally be deemed an accredited investor if it has at least US $5 million in net worth. The SEC is scheduled to reconsider these financial factors with a view to increasing the threshold numbers. A qualified purchaser on the other hand, is a much higher threshold and is generally an individual, with at least US $5 million of investment assets, and an institution with at least US $25 million of investment assets. A knowledgeable employee is generally an executive officer or director of the fund or the Manager (or other person serving in a similar capacity) or an employee who participates on a regular basis in the fund s investment activities. 232

237 United States of America 3. If the Fund needs to be authorised or registered in the Jurisdiction in order for it to be offered in a non-public offering, what ongoing obligations does the Fund or the Manager need to comply with in order to maintain the authorisation or registration? There are no such authorization or registration requirements for non-public offerings, although a Form D will likely need to be filed with the SEC and in some states. 4. Are there any restrictions on the marketing activities the Manager can undertake outside the Jurisdiction in relation to prospective investors in the Fund who are in the Jurisdiction? Any marketing activities taken by a Manager outside of the US but targeted to residents of the US will face the same regulatory hurdles as are faced by persons undertaking such activities within the US. 5. Can representatives of the Fund or the Manager market the Fund to prospective investors whilst the representatives are in the Jurisdiction? This triggers a concern for broker-dealer licensing for the Manager and its personnel. The SEC adopted Exchange Act Rule 3a4-1 to establish a nonexclusive safe harbor from broker registration requirements for certain persons associated with an issuer of securities (e.g., a fund). In the event that an adviser s employees meet the prerequisites of this Rule, they should be able to market funds issued by the adviser and/or the Manager without having to be associated with an SEC-registered broker-dealer. This will apply equally to employees of a non-us adviser. Because the Rule is only a safe harbor as opposed to a mandatory rule, failure to satisfy all aspects of the Rule will not necessarily preclude reliance on the Rule nor will it necessarily require the employees or entity to register. In order for Rule 3a4-1 to apply, the persons marketing the funds in the US must be associated persons of the Manager or of a company that controls, is controlled by, or is under common control with, the Manager. However, Rule 3a4-1 generally has the following prerequisites that a Manager s employees must meet in order to avail themselves of the safe harbor with respect to the Manager s funds (or funds issues by a Manager under common control): 1. They cannot be subject to a statutory disqualification. These include being: subject to an SEC order finding that they or one of their associated persons violated laws or regulations; convicted of felonies or misdemeanours involving certain fraudulent conduct; found by the SEC to have engaged in the aforementioned felonies or misdemeanours; or subject to certain consent orders or decrees. 233

238 United States of America 2. They cannot be compensated directly from revenue generated from the sale of securities (e.g., the funds). This means that employees may not receive compensation that is conditioned on or the amount of which is tied to any investor s investment in a Fund. This includes paying the employees direct sales commissions or any other type of payment that is intended to reward the employee for his/her success in selling securities. This would also include sharing a portion of the management and performance fees/performance allocation generated by the investors whom the employees locate unless, as described below, the investors were solicited as clients for the Manager and not as investors in the funds. 3. They may not be, or have been in the last 12 months, associated persons of a broker-dealer. This condition may pose an insurmountable barrier to reliance on Rule 3a4-1 if a Manager and its personnel are affiliated with a US broker-dealer. Employees of an entity under common control with an SEC-registered broker-dealer are considered associated persons of the broker-dealer. 4. They must primarily perform substantial duties on behalf of the Manager and the funds other than in connection with the sale of interests in the funds; and 5. They may not participate in more than one offering of interests in the funds in any 12-month period. With respect to conditions 4 and 5, persons performing ministerial or clerical work as well as persons handling correspondence and communications with potential investors will not be required to comply with these conditions as long as those persons are not engaged in any oral or written solicitation activities and are not compensated on the basis of fund sales. The SEC construes this rule very narrowly. The JOBS Act has not had any impact on broker-dealer licensing in this context. 6. Can a local agent be appointed to market the Fund to prospective investors in the Jurisdiction? If yes, what licences or approvals does the local agent require? If the local agent is an employee of the fund or the Manager and otherwise satisfies the requirements of Rule 3a4-1 described above, then the agent may be able to market the fund without any licensing other than in those states that require the licensing of solicitors. If the local agent is independent of the Manager then the agent will almost certainly need to be registered with the SEC as a broker-dealer. 7. If a local agent is appointed to market the Fund to prospective investors in the Jurisdiction, can representatives of the Fund or the Manager accompany the local agent to meet with prospective investors? If yes, what activities are the representatives permitted to undertake and what information are the representatives permitted to discuss with prospective investors? 234

239 United States of America They are permitted to accompany the local agents and they can discuss anything that is accurate and not misleading about the fund. They should avoid direct sales negotiations unless they satisfy the requirements of Rule 3a Can the Manager provide details of the Fund in response to an unsolicited request from a prospective investor in the Jurisdiction? Yes. However, this will depend on whether the solicitation was truly unsolicited. For example, the request would be considered solicited if it resulted from reading the Manager s unrestricted website or an article in which the fund was described and which was sponsored or paid for by the Manager. Note that the JOBS Act has liberalized this somewhat as long as the Manager and fund satisfy the JOBS Act requirements. 9. Can the Fund accept an unsolicited investment from a prospective investor in the Jurisdiction? Yes, although the number of US person investors will still be counted against the Manager s limits on SEC registration as an investment adviser (unless the Manager satisfies the private fund manager exemption) and against the limits for the exemptions from the fund s registration under the Investment Company Act. 10. Can the Manager give information about the Fund in response to a request for proposal from a prospective investor in the Jurisdiction? Does it make a difference whether the request for proposal is private (i.e. sent to the Manager directly) or public (i.e. open to anyone)? Yes, they can respond and no it would not make a difference whether the RFP is private or public. 11. Can the Fund or the Manager meet with a prospective investor in the Jurisdiction to discuss the Fund at the request of that prospective investor? Yes, but the Fund and Manager should limit the visits to that prospective investor. 12. Can the Manager attend a beauty parade or finals presentation in the Jurisdiction in order to discuss the Fund at the request of a prospective investor? Yes, but the Fund and Manager should limit the visits to that prospective investor. 235

240 United States of America 13. If an investor in the Jurisdiction subscribes for shares in the Fund: (a) is there a requirement that the subscription agreement be in a particular language? No. (b) can the subscription agreement be governed by a law other than the laws of the Jurisdiction? Yes. (c) are there any other provisions that must be included in the subscription agreement as a result of regulatory requirements in the Jurisdiction? Nothing is mandatory but there are many provisions that are necessary to establish the US regulatory and tax basis on which the fund is obtaining subscriptions in the US as well as to identify the US tax (e.g., FATCA) and retirement plan (ERISA) status of the investors. 14. Would your answers to the above questions in this Part III be different if: (a) shares in the Fund were listed on a stock exchange? Slightly. Regulation S and Regulation D have been interpreted by the SEC to permit a simultaneous US private placement with an offshore public offering. There are a number of requirements to make sure the US private placement conditions are satisfied while there is public solicitation outside of the US. Also, an offering made through a non-us exchange that does not target US persons may be outside of the SEC s jurisdiction and thus not need to rely on the exemptions in Sections 3(c)(1) or 3(c)(7) of the Investment Company Act. (b) the Fund was structured as a unit trust rather than as a company? No, although the use of a trust can have a different tax impact. Unit trusts are generally considered to be associations taxable as corporations for US income tax purposes. This result works well for US tax-exempt investors and not well for US taxable investors although taxable investors may take advantage of the PFIC/QEF regime to eliminate most of the tax disadvantages. (c) the Fund was structured as a limited partnership rather than as a company? It would make no difference other than for US tax purposes. Note that under the CFTC US person definition, a US person includes a non-us limited partnership that has a US general partner. 236

241 United States of America (d) the Fund (or where the Fund is a feeder fund, the master fund in which it invests) was a fund of funds that invests in other investment funds? This will not make a difference under the US securities laws and regulations. However, it is very difficult to offer fund of funds in the US that are managed outside of the US. This is due to the fact that for US income tax reasons the portfolio funds must generally comply with certain IRS regulations in order to avoid income tax problems for the US investors. (e) the Fund was a closed-end fund (i.e. investors do not have the ability to redeem their investments)? The open or closed end structure would make no difference for US securities or tax law purposes. 237

242 United States of America Part IV Servicing Clients in the Jurisdiction 1. Are there any restrictions on the information the Manager can send to an existing client in the Jurisdiction in relation to the client s investment portfolio or investment in the Fund? No, assuming the information is accurate and is not material, non-public information about securities. Performance advertising and marketing materials are subject to strict SEC regulation. Therefore, any performance discussion should be carefully reviewed and footnoted, especially if the performance history will be used for marketing purposes. Note that if a US client or investor was originally accepted as a client or investor when the client or investor was not a US person, there may be restrictions on the Manager offering new services or products to the client or investor after he or she becomes a US person. 2. Can the Manager meet with an existing client in the Jurisdiction, at their offices or elsewhere in the Jurisdiction, to discuss the client s investment portfolio or investment in the Fund? Yes, but care must be taken with respect to any discussions regarding investing in new products. Note the last sentence in the previous response. 238

243 United States of America Part V Miscellaneous Information 1. What is the name(s) of the government department or regulator that is responsible for regulating the marketing of investment management services and the marketing of investment funds in the Jurisdiction? At the federal level, the primary securities regulator is the Securities and Exchange Commission. On a secondary federal level, there is (i) the Commodity Futures Trading Commission which regulates managers of funds investing in commodity derivatives, including swaps and OTC forwards, (ii) the Financial Industry Regulatory Association which is a self-regulatory organization with responsibility for fund sales made through US brokerdealers, (iii) the National Futures Association which is a self-regulatory organization with responsibility for regulating commodity pool advisers and commodity trading advisers, and (iv) the Board of Governors of the Federal Reserve Systems which regulates the offering of funds by banks, bank holding companies and their affiliates as well as the provision of margin loans by banks and broker-dealers. There are also 49 different state securities regulators that can have involvement in the fund offering and sales process although state legislation and regulation is largely pre-empted by federal law and regulation. Some state regulators are more aggressive than others. 2. What is the principal legislation governing the marketing of investment management services and the marketing of investment funds in the Jurisdiction? At the federal level, the Investment Advisers Act of 1940 is the principal legislation of relevance to the marketing of investment management services and the Investment Company Act of 1940 and the Securities Act of 1933 are the principal legislations of relevance to the offer and sale of investment funds. The Investment Company Act primarily applies to the question of whether or not a fund must be registered with the SEC (only investment companies deemed offered to the public must be registered) and the Securities Act adds additional guidance on when an offer will be considered to be made to the public. The Securities Exchange Act of 1934 has relevance for the regulation of broker-dealers and securities exchanges and establishes the limitations on the number of securities holders that a private fund exempt under Section 3(c)(7) of the Investment Company Act may have. Each of the four acts is supplemented by regulations promulgated by the SEC. In many ways, the SEC regulations are more specific than the legislation and thus more relevant to the analytical process. The SEC also publishes interpretations and guidance in various forms. The states will also have their own sets of securities (but rarely commodity derivatives) laws and regulations although those are typically pre-empted by federal law. The Commodity Exchange Act of 1936 is the principal legislation of relevance to the marketing of commodity derivatives advice and of funds that invest in commodity derivatives. The CFTC and NFA have issued regulations implementing this Act. 239

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