Asset Management Regulatory Roundup - November 2017 - Issue 11

by Dechert LLP

Dechert LLP

PRIIPs: updated Q&As on the PRIIPs KID

The Joint Committee of the European Supervisory Authorities (ESAs) have published updated Q&As on the key information document (KID) requirements for packaged retail and insurance-based investment products (PRIIPs).

Updates to the Q&As include:

  • requirement for a KID for products listed on a regulated market;
  • the treatment of credit-linked notes;
  • applying a correction for risk neutrality;
  • OTC derivatives language;
  • provision of information on the underlying options of a multi-option product;
  • presentation of information on costs, etc.

Read the Q&As »

MiFID II: ESMA updates Q&As on market structures and transparency

European Securities and Markets Authority (ESMA) has updated its Q&As on market structures and transparency to cover, inter alia, the following topics:

  • third country issues;
  • equity and non-equity transparency;
  • pre-trade transparency;
  • direct electronic access and algorithmic trading.

Read the market structure Q&As »

Read the transparency Q&As »

LEIs: requirements under MiFID II

In order to assist firms to comply with their obligations under MiFID II, ESMA has made available a video and powerpoint slides that it used for a webinar on the legal entity identifier (LEI).

View the video here »

Read the accompanying slides here » 

MiFID II / EMIR – publication of delegated regulations on indirect clearing arrangements

Delegated Regulations relating to indirect clearing arrangements under MiFID II and EMIR have been published in the Official Journal of the European Union. They will apply from 3 January 2018.

Read the MiFID II delegated regulation »

Read the EMIR delegated regulation »

EMIR: publication of updated Q&As

ESMA has updated its Q&As on the implementation of EMIR to cover the following topics:

  • updating LEIs due to mergers and acquisitions; and
  • buy/sell indicators for certain FX swaps and cross-currency swaps.

Read the Q&As »

EMIR: Compromise proposal published by the Council of the EU

The Council of the EU has published a Presidency compromise proposal on the proposed regulation amending EMIR as concerns the clearing obligation and its suspension, the reporting requirements, risk mitigation techniques for OTC derivative contracts, and registration and supervision of trade repositories.

Read the compromise proposal »

HEDGE FUNDS: IOSCO publishes its fourth hedge fund survey report

The International Organization of Securities Commissions (IOSCO) has published the findings from its fourth hedge fund survey which is based on data as of 30 September 2016.

The findings include:

  • global assets under management rose by 24% to US $3.2tn since the last survey two years previously;
  • the Cayman Islands continue to be the domicile of choice, representing 53% of global total by net asset value;
  • the most widely used strategy was equity long/short, followed by global macro and fixed income arbitrage;
  • hedge funds have a considerable liquidity buffer suggesting that, under normal conditions, they are able to meet redemption request; and
  • 3.8% of fund assets had constrained redemptions by using liquidity management tools such as gates, suspensions or side pockets.

Read the report »

MARKET ABUSE: updated Q&As

ESMA has updated its Q&As on the Market Abuse Regulation by adding questions on trading during closed periods and the types of transactions by persons discharging managerial responsibilities prohibited during a closed period.

Read the Q&As »

MONEY MARKET FUNDS: ESMA publishes final report

ESMA has published its final report on technical advice, implementing technical standards and guidelines under the Regulation on money market funds (MMFs).

In the report relating to the establishment of a reporting template and the timing of implementation of the related database, ESMA confirms that managers will need to send in their first quarterly reports (as per Article 27 of the MMF Regulation) to national competent authorities in October/November 2019 rather than July 2018.

With regard to stress tests, managers of MMFs should conduct common reference stress test scenarios. ESMA is to update the guidelines to reflect this.

The MMF Regulation will enter into force on 21 July 2018.

Read the final report » 

TAX: Investment Management Strategy 2

In the Autumn Budget 2017, the UK announced that it will publish a new long-term strategy for the UK asset management industry (termed “Investment Management Strategy 2”). There are currently limited details on what this long-term strategy will include, but we understand that it will include actions, to be taken forward in close collaboration with the industry, on:

  1. strengthening asset management talent, including expanding the industry’s domestic skill base;
  2. harnessing financial technology solutions to ensure that UK asset managers are global leaders in fintech solutions and innovative investment strategies;
  3. mainstreaming innovative investment strategies; and
  4. continuing a coordinated programme of international engagement.

As part of this work stream an Asset Management Taskforce has recently been established to promote industry dialogue with the government and relevant regulators.

TAX: Prospective UK Tax Changes affecting Real Estate Funds – Extension of CGT and Corporation Tax to non-UK residents on the direct and “indirect” sale of UK commercial real estate

In the Autumn Budget 2017, the UK government announced that from April 2019 tax will be charged on gains made by non-UK residents on the disposal of all types of UK immovable property (including commercial property), extending existing rules that apply only to residential property. These changes are being introduced to more closely align the tax treatment of non-UK resident owners of UK immovable property with that of UK residents, and to reduce the incentive for multinational groups to hold UK property through offshore structures.

In addition, new rules are being introduced to extend the rules to “indirect” sales and disposals of UK immovable property made by closely or widely-held non-resident companies. Indirect disposal rules will apply where an entity is “property rich”, which is broadly where 75% or more of its gross asset value (so not including liabilities such as loan financing) at disposal is represented by UK immovable property. The charge will apply where a person holds, or has held at some point within the five years prior to disposal, a 25% or greater interest in the entity. As part of this change, the proposed new rules will remove the current exemption from capital gains tax of widely-held non-UK resident companies (which currently applies on disposals of interests in residential property).

The new rules will likely affect nearly all property investment and fund structures holding UK immovable property and introduce new tax charges for non-residents investing directly or indirectly in such property. However, HMRC notes that the impact of the proposals on the funds industry will need to be carefully considered and the intention is to introduce targeted exemptions for certain institutional investors such as pension funds. There will also be a rebasing of property values as at April 2019 for the purposes of calculating gains.

The closing date for comments is 16 February 2018.

Read the Consultation »

Fund distribution resources

Dechert maintains two services designed to assist managers with global fund distribution and registration.

World Compass - A global web-based service offering investment firms 24/7 access to detailed information on fund marketing, separate accounts and beneficial ownership reporting

World Passport - An outsourced solution for fund registration globally for both UCITS and AIFs


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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