Asset Management

Asset Management update - October 2017

Central Bank of Ireland UCITS & AIFMD Q&A

The Central Bank of Ireland issued updated versions of both the UCITS and AIFMD Q&As on their website. One of the amendments on each, relate to the requirement for Irish UCITS and authorised AIFs to maintain a dedicated email address. The Q&As confirm that both Irish UCITS and Irish authorised AIFs managed by non-Irish fund management companies must provide the CBI with a dedicated email address by 10 November 2017.

 

ESMA various updates to Q&A

The European Securities and Markets Authority (ESMA) has issued various updates to its Q&A documents. These include:

AIFMD & UCITS Q&A updates

Updated Q&A on the application of the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS) and the Alternative Investment Fund Managers Directive (AIFMD).

The UCITS Q&As includes one new question and answer on:

  • Periodic reporting under Article 13 of SFTR for UCITS and AIFs to investors on the use of SFTs and total return swaps.

The AIFMD Q&As includes three new questions and answers on:

  • Application of remuneration disclosure requirements to staff of the delegate of an AIFM to whom portfolio management or risk management activities have been delegated;
  • Manner of disclosure of AIFM delegates’ staff remuneration in Annual Reports; and
  • Periodic reporting under Article 13 of SFTR for UCITS and AIFs to investors on the use of SFTs and total return swaps.

MiFID II Q&A updates

Updated Q&As regarding the implementation of the Markets in Financial Instruments Directive (MiFID II). The Q&As include answers to questions regarding:

Benchmarks regulation Q&A updates

Updated Questions and Answers regarding the implementation of the Benchmarks Regulation (BMR). The Q&As include four new answers regarding the following topics of the BMR:

  • Scope of the BMR: (i) Application of the BMR to EU and third country central banks; (ii) Exemption on single reference price.
  • Definitions of the BMR: (i) “family of benchmarks”, (ii) “use of a benchmark”

 

ESMA overview of EU derivatives markets size

ESMA has produced, for the first time, data on the size of the interest rate, credit, equity, commodity and foreign exchange derivatives markets in the European Union’s (EU), based on the weekly data it receives from trade repositories (TRs).

According to ESMA’s initial analysis, which was performed on the data available on 24 February 2017, the size of the EU’s derivatives markets across all asset classes was estimated as having a notional value of about €453 trillion and around 33 million transactions. The details are included in an article - EU derivatives markets ─ a first-time overview – included in the latest version of ESMA’s Trends, Risks and Vulnerabilities. The data provided by TRs is an extensive source of information about derivatives, including bank and non-bank entities.

Finance Bill 2017

The first stage of the Finance Bill was presented on 17 October 2017, it included a number of amendments that could impact on Irish Real Estate Funds (“IREF”) and Section 110 companies. Section 16 introduced a number of the proposed changes to the application of the IREF rules which are mainly of a technical/clarification nature. In addition, a number of advance clearance procedures for certain exempt investors are to be given legislative basis through the Finance Bill.  The advance clearances, previously published through Revenue Guidance, facilitate the following for such exempt investors;

  1. Upfront exemption from withholding tax arising from direct disposal of units (required to be withheld by the purchaser at a rate of 20% where consideration for disposal exceeds €500,000)
  2. Upfront exemption from withholding tax or refund mechanism directly from IREF itself (depending on traceability of relationship) for other chargeable events, such as distributions etc.

As you will remember Finance Act 2016 introduced significant changes to the taxation of section 110 companies holding particular Irish property-related assets, restricting certain interest deductions in relation to ‘specified property business’. Finance Bill 2017 proposes the broadening of the range of assets to be included within the ‘specified property business’ of such companies to include the holding of shares in certain Irish property rich companies (i.e. shares that derive their value/the greater part of their value from Irish land). 

The question of whether or not shares can be said to derive their value from Irish property is a notoriously complex one.  The Finance Act 2016 changes are quite targeted in their application, however the proposed amendments could have unintended consequences by potentially bringing other section 110 companies within the scope of those changes. In our view the proposed Finance Bill 2017 amendments add unnecessary complexity to the section 110 rules.   

It is worth noting that this is only the first stage of the Finance Bill and is subject to amendment. Before the Bill is enacted it must pass through committee stage and report stage review in early November before going through Seanad review. The Seanad review process won’t conclude until 12 December. Find out more