Asset Management

Asset Management update - April 2017

ESMA publishes updated UCITS and AIFMD Q&A

On 6 April 2017 the European Securities and Markets Authority (ESMA) published updated questions and answers documents (Q&A) on the application of the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS). Both Q&A’s include one new question and answer each on:

  • AIFMD: cross-border marketing of EU AIFs by EU AIFMs under Article 32 of the AIFMD, clarifying that the AIF marketing passport may only be used for marketing to professional investors as defined in the AIFMD; and
  • UCITS: cross-border activities by UCITS management companies, clarifying that a UCITS management company can notify cross-border activities without having to identify a specific UCITS.

 

ESMA clarifies market structure issues under MIFID II

On 5 April 2017 ESMA issued detailed guidance regarding the implementation of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). ESMA published 22 new Question and Answers (Q&As) which provide further detail on how to implement certain regulatory provisions on market structure topics. The Q&As aim to promote common supervisory approaches and practices thus ensuring a harmonised implementation. Amongst other issues, the Q&As provide answers regarding Organised Trading Facilities (OTFs) and Systematic Internaliser (SI). ESMA also published Q&As on commodity derivatives, market data and transparency issues.

 

Consultation on new methodology to calculate funding levies

The Central Bank of Ireland recently published a Consultation on New Methodology to Calculate Funding Levies – CP 108. The Consultation Paper lays out the Central Bank’s proposal to revise the way the industry funding levy is calculated for banks, investment firms, fund service providers and EEA insurers. It is proposed that the industry funding levy for banks be calculated according to the ECB methodology. The industry funding levy for investment firms and fund service providers would be smoothed, replacing the stepwise levy by a smoothed function. EEA insurers, which are regulated by the Central Bank for conduct of business, would be levied more if they are large or write motor business in Ireland.

 

SEC staff paper on limitations under 1940 Act to permit certain global “master-feeder” arrangements

The Staff of the U.S. Securities and Exchange Commission (SEC) issued a no-action letter (Staff Letter) based on a query on Section 12(d)(1) of the Investment Company Act of 1940 (1940 Act). The Staff Letter provides no-action assurance to global investment managers and sponsors seeking to offer investment products across non-U.S. jurisdictions using a “master-feeder” arrangement that may conflict with certain “fund of funds” restrictions under the 1940 Act. More specifically, the Staff Letter contemplates non-U.S. feeder funds investing in a single U.S. open-end investment company registered under the 1940 Act (U.S. Master Fund), in excess of the investment restrictions under Section 12(d)(1) of the 1940 Act.

It should be noted however that under the UCITS Directive, UCITS are currently prohibited from investing solely in the shares of a U.S. registered investment company. This limitation effectively prohibits the ability of a UCITS to serve as a Non-U.S. Feeder Fund – an unfortunate outcome given the popularity of UCITS in Europe among retail investors. For more information click here.

 

New tax landscape for Irish property funds: Finance Act 2016

Finance Act 2016 contained a number of measures in relation to the taxation of certain Irish property-related assets. Our own Billy McMahon and Peter Vale have an article in the Irish tax review that addresses the impact these changes will have on Irish regulated funds. The article covers new concepts and definitions such as that of the Irish real estate investment fund (“IREF”). It also provides an outline of the application of withholding tax and how to calculate the withholding amount. As well as a brief overview of withholding tax reclaim procedures. For further information click here.