Tài liệu Issue 93 – Regulatory and Tax Developments in June 2012 pptx

1 FUND NEWS June 2012 Investment Fund Regulatory and Tax developments in selected jurisdictions Issue 93 – Regulatory and Tax Developments in June 2012 Regulatory News European Uni

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FUND NEWS June 2012

Investment Fund Regulatory and Tax developments in

selected jurisdictions

Issue 93 – Regulatory and Tax

Developments in June 2012

Regulatory News

European Union

European Commission presents

legislative package to improve

investor protection

On 3 July 2012, the European

Commission (EC) proposed a package of

measures to rebuild consumer trust in

financial markets and align rules across

competing products The package is

composed of three legislative proposals:

a proposal aiming at updating the UCITS framework (UCITS V), a proposal for a regulation on the ‘’key information document for packaged retail investment products’’ (PRIPS) and a revision of the Insurance Mediation Directive (IMD)

UCITS V

One year after the entry into force of the UCITS IV Directive, the EC published a UCITS revision – called ‘‘UCITS V’’ – which focuses on harmonizing the role and liability of UCITS depositaries, the remuneration of UCITS managers and

Regulatory Content

European Union

UCITS V, PRIPS and IMD proposals Page 1

ESMA Guidelines on sound remuneration

ESMA proposes detailed rules on derivatives, central counterparties and

Commission technical standards regarding

Agreement on EU Venture Capital and

Social entrepreneurship funds Page 5

Cyprus

France

AMF consults on AIFMD Page 6

AMF consults on Inducements Page 7

The Netherlands

AIFMD Implementation Page 8

UK

The FSA has proposed to delay for a year the implementation of COBS 14.4 Page 9

Tax Content

The Netherlands

CAA with USA re closed FGR Page 10

UK

Reclaims of excess Withholding Tax deducted from dividend and interest income

in Taiwan – a ruling for OEICs Page 10

Luxembourg

Aberdeen E-alert Page 11

Fund News – June 2012

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sanctions The aim of the proposal is to

enhance investor protection in the wake

of the financial crisis, the Lehman

bankruptcy and the Madoff fraud The

proposal takes the form of a Directive It

will now go to the European Parliament

and the Council for their consideration

under the co-decision procedure Once

they reach agreement, Member States

usually have two years to transpose the

provisions into their national laws and

regulations, meaning that the new rules

could apply, according to the European

Commission, by the end of 2014 By this

date, the necessary package of

implementing measures should also be

adopted

1 Depositary rules

The proposal aims at establishing more

detailed depositary rules which are

essentially the same requirements as

those within the Alternative Investment

Fund Managers Directive (AIFMD) Each

UCITS fund is required to have a single

depositary, with a written contract The

EC also wants to define more precisely

the types of entities which can act as

depositaries – a credit institution, an

investment firm subject to capital

adequacy standards or an investment

company or management companies

acting on behalf of the UCITS that was

appointed as a custodian before the

entry into force of this Directive The

proposal also introduces several detailed

duties for the depositary such as

safekeeping, cash monitoring and

oversight duties The depositary will

need to ensure it does not undertake

activities that could create a conflict of

interest between the UCITS, the

investors, the Management Company

and the depositary

The legislative proposal also strengthens rules relating to delegation of

depositary’s tasks and adds clarification

on the depositary’s liability The depositary will be liable for the loss by the depositary or a third party to whom the custody of financial instruments has been delegated, unless it can prove that the loss has arisen as a result of an external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary

Furthermore, to the contrary of the AIFMD, the depositary liability cannot be delegated or transferred through a contract with third parties

2 Managers remuneration The draft UCITS V Directive aligns with the AIFMD in stating that remuneration policies should be put in place to ensure the sound management of risks and control of risk-taking behaviour, for those categories of staff whose professional activities have a material impact on the risk profiles of the UCITS they manage

The remuneration policies and practices have to cover salaries and discretionary pension benefits Remuneration policies should also be designed to discourage any risk-taking which is inconsistent with the UCITS risk profile or constitutional documents and should help to prevent conflicts of interests and protect investor interests There is also a requirement for the UCITS management company to provide a disclosure in the annual report Furthermore, the proposal lists the principles that the Management Company will have to comply with in order to have remuneration policies that are appropriate to their size, internal organization and nature, scope and complexity of their activities

3 Sanctions The proposal allows national authorities

to take administrative sanctions against the management body or any other individuals who under national law are responsible for the breach The draft UCITS V Directive requires that the sanctions should be effective, proportionate and dissuasive It also requires Member States competent authorities to publish any sanction or measure imposed for breach of the national provisions adopted following the implementation of this Directive without undue delay, including information on the type and nature of the breach and the identity of persons responsible for it, unless such publication would seriously jeopardise the stability of financial markets A catalogue of sanctions is drafted and the proposal details the type

of administrative sanctions and measures the national competent authority applies

The Commission’s proposal is available

here (provisional version)

Fund News – June 2012

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PRIPS

The PRIPS proposal aims to improve

transparency in the investment market

for retail investors For this, the

consumers should be informed in a

short and standardized format that is

easy to understand: the ``Key

Information Document`` (KID) The

European Commission seeks to help

retail investors to make a more informed

decision on whether an investment is

right for them or not and be able to

compare investment products with each

other Each KID will have to follow a

common standard as regards structure,

content and presentation and will need

to provide consumers with information

on the product’s main features, risks and

costs associated with the investment in

that product The KID will serve as a

stand-alone document in the sense that

retail investors should not be required to

read other documents to be able to

understand the key features of the

investment product and take an

informed investment decision, and it

should be clearly distinct from marketing

materials

While such disclosures for UCITS have

already been introduced by UCITS IV,

the PRIPS proposal wants to introduce

this concept to all other packaged retail

investment products that are being

offered to retail investors The list of

products for which a KID will be required

includes all types of investment funds,

insurance-based investments and retail

structured products, in addition to

private pensions The proposal requires

all manufacturers of these investment

products (e.g investment fund

managers, insurers, banks) to produce a

KID for each investment product

However, the proposal only requires manufacturers of investment products

to produce a KID when the products are

to be sold to retail investors KIDs do not need to be produced where the

products are to be sold to professional investors only The Commission’s proposal also sets out that it does not apply to insurance products that do not offer investment opportunities as well as occupational pension schemes or pension products for which the employer is required by law to contribute financially and where the employee has no choice as to the pension provider Furthermore, the Regulation does not apply to certain securities that are already covered by the Prospectus Directive and other securities which do not embed a derivative Also the proposal does not apply to direct investments of retail investors (e.g directly buying shares in companies or sovereign bonds) as in this case banks, insurers and fund managers are not “packaging” the investment into

a product to be marketed and sold to retail investors Finally, simple savings products are also not covered, because they are easier to understand and compare

The proposal takes the form of a Regulation and would therefore not require implementation into national law but will be directly applicable in all Member States shortly after it gets adopted The Regulation would also be supported by detailed

delegated/implementing acts to standardize the presentation of information required by the Regulation

as far as possible

The Commission’s proposal here

(provisional version) will now go to the

European Parliament and the Council for their consideration under the co-decision procedure The final Regulation is expected to be in place by the end of

2014

Fund News – June 2012

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IMD

The European Commission has also

published a proposed Directive to

amend and replace the Insurance

Mediation Directive (IMD), known as

"IMD 2" The IMD 1 regulates selling

practices for all insurance products,

including both general insurance

products (e.g motor and household

insurance) and those containing

investment elements The proposed

IMD 2 Directive seeks to improve

regulation in the retail insurance market

and policyholder protection The main

aspects of the Commission’s proposal

are:

• Expansion of the scope of

application of IMD 1 to all

distribution channels

• Rules on conflict of interest

• Administrative sanctions

• Measures for breach of key

provisions of IMD 1

• Rules to enhance the suitability and

objectiveness of advice (disclosure

of actual amounts of commission)

• Procedure for cross-border entries

to insurance markets across the EU

The Commission’s proposal is available

here (provisional version)

ESMA proposes Guidelines on sound remuneration policies for AIFM

On 28 June 2012 the European Securities and Markets Authority (ESMA) issued a 104 page consultation paper (ref: ESMA 2012/406) setting out formal proposals for guidelines on sound remuneration policies for Managers that fall under the scope of the Alternative Investment Fund Managers Directive (AIFMD)

The remuneration requirements will apply to all AIFMs which are within the scope of the Directive, however those non-EU AIFMs that use the national private placement regimes to market to professional investors in the EU will only

be subject to the rules on remuneration disclosure

The guidelines are broadly aligned with remuneration policies in other financial sectors and ESMA has cooperated closely with the European Banking Authority (EBA) in drafting the proposals

According to ESMA the remuneration policies should principally address alignment of interests between the fund investors and the portfolio managers who make investments on behalf of the funds The guidelines are divided into three main parts: governance, risk alignment and transparency with the principle of proportionality relevant for all

three parts

For the purposes of the guidelines remuneration consists of all forms of payments or benefits paid by the AIFM

or paid by the AIF itself, including fixed

or variable monetary and non-monetary benefits This would include carried interest, shares, options and pension contributions Ancillary payments or benefits that are part of a general, non-discretionary, AIFM-wide policy and pose no incentive effects in terms of risk assumption can be excluded from the definition of remuneration for the purposes of the AIFMD-specific risk alignment remuneration requirements Any payment made directly by the AIF to the benefit of the selected staff which consists of a pro-rata return on any investment made by those staff members into the AIF should not be subject to any of the remuneration requirements Fees and commissions received by intermediaries and external service providers in case of outsourced activities are not covered by the guidelines

The consultation runs until 27 September and ESMA aims to publish a final report before the end of 2012, so that they will be in place in advance of the AIFMD transposition deadline of 22 July 2013 The full paper is available via the following web link:

Fund News – June 2012

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ESMA proposes detailed rules on

derivatives, central counterparties

and trade repositories

On 25 June 2012 ESMA launched a

consultation paper (ref: ESMA 2012/379)

on technical standards under the

European Markets and Infrastructure

Regulation (EMIR) governing OTC

derivatives, central counterparties (CCP)

and trade repositories that was adopted

by Parliament on 29 March 2012

The requirements set out in the draft

technical standards include:

• Defining the framework for the

application of the clearing obligation;

• Specifying the risk mitigation

techniques for OTC derivatives not

centrally cleared;

• Laying down the requirements for

the application of exemptions to

non-financial counterparties and

intragroup transactions

• A comprehensive set of

organisational, conduct of business

and prudential requirements for

CCPs;

• Specifying the details of derivatives

transactions that need to be

reported to trade repositories;

• Defining the trade repositories’ data

to be made available to relevant authorities;

• Setting the information to be provided to ESMA for the authorisation and supervision of trade repositories

The consultation closes on 5 August

2012 and the final draft standards are intended to be submitted to the EU Commission for endorsement by 30 September 2012 The 293 page consultation paper is available via the following web link:

Commission adopts technical standards regarding Short Selling

On 29 June 2012 the European Commission adopted technical standards, based on the work of the European Securities and Markets Authority (ESMA), setting out the detailed rules aimed at reducing the risk

of settlement failures linked to naked short selling, as well as the means by which market participants should disclose significant short positions to the market The technical standards specify the details of the so-called "locate rule,"

which ensures that short sales do not result in a failure to deliver The new

rules also detail how ESMA is to determine the shares which are exempt from the Short Selling Regulation by virtue of their principal trading venue being outside the Union

In order to fully implement the Short Selling Regulation, two final measures –

a Regulatory Technical Standard and a Delegated Act – are expected to be adopted shortly

The technical standards are available

here:

Political agreement on EU Venture Capital and Social entrepreneurship funds

On 29 June 2012 the Danish EU Presidency announced that it has reached a political agreement about a European label for venture capital and social entrepreneurship funds in the EU The Regulations which were initially proposed in December 2011 will need to

be officially adopted by Council and Parliament and will enter into force thereafter No transposition into national law will be required The announcement

is available here:

Fund News – June 2012

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Cyprus

UCITS IV transposed

On 15 June 2012 the UCI Law of 2012

came into effect after the Cyprus House

of Representatives passed into law the

transposition of the UCITS IV Directive

France

Public consultation by the AMF

regarding the transposition of the

AIFM Directive

On 15 June 2012 the Autorité des

Marchés Financiers (AMF), the French

regulator, launched a public consultation

based on a draft report published by the

AIFMD Stakeholders’ Committee (the

Committee) that contains twenty-five

recommendations for transposing the

AIFM Directive

The draft report highlights the

substantial lead enjoyed by the French

fund management industry in terms of

compliance with the Directive’s

requirements and the role that some

funds, such as private equity funds, play

in financing the French economy

The draft report calls for the Directive to

be implemented faithfully and makes

recommendations in the following areas:

1 Stepping up international promotion

of the Paris financial centre

The Committee recommends

promoting French fund

management of alternative

investment funds (AIFs)

internationally by intensifying the

action initiated by transposing the UCITS IV Directive, in order to make the Paris financial centre more attractive to fund managers and investors

2 Seizing the opportunities created by the Directive to give fresh impetus

to French fund managers

The Committee recommends maintaining a single management company regime, which can be modulated through a specific program of operations that matches the features of each type of strategy With regard to the requirement for the risk control function, the report advocates applying the proportionality principle, for example, in the case of

managers of private equity or real estate funds

3 Reshaping the range of French funds to make it clearer

The Committee recommends reshaping and simplifying the regulatory range of French funds into three categories:

• UCITS,

• AIFs marketed to retail investors (including retail non-UCITS or other specialised retail funds)

• AIFs marketed to professional investors

The report also recommends harmonising subscription thresholds designed to ensure that the most complex and riskiest products are marketed only to professional

investors, as well as reviewing the AIFs’ eligibility rules for institutional investors

4 Ensure a level playing field for depositaries The Committee analysed the challenges that the AIFM Directive raises for French depositaries in terms of

competition, given that French depositaries are already compliant to

a large extent with the provisions It recommends consolidating the current framework and seizing the opportunities created by the Directive to develop additional activities The Committee also calls for a level playing field between French depositaries and branches of foreign investment services

providers

The consultation will close on 6 July

2012 The full text is available via the following web link: http://www.amf-france.org/documents/general/10443_1 pdf

Fund News – June 2012

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Public consultation by the AMF

regarding inducements received in

the course of the marketing and

indirect distribution of financial

instruments

On 7 June 2012 the AMF launched a

public consultation concerning

inducements received in the course of

the marketing and indirect distribution of

financial instruments

The consultation presents a summary of

findings taken from an analysis of some

50 reports on these areas sent to the

AMF by investment services compliance

officers However, it does not cover

matters relating to remuneration and

benefits received by trading facilities

that execute client orders

The following are the main positions and

recommendations of the AMF:

• Ensure that the receipt of

remuneration or monetary benefit

does not compromise the obligation

to act in the best interests of the

client

The AMF recommends verification

that the expected level of

inducements for a given product is

in line with the normal practices of

other product providers of

comparable French products

• Improve customer service and the

duty to act in the best interests of

clients in the provision of portfolio

management services

Where the portfolio manager makes investment decisions on behalf of the client, the AMF considers that this could lead to a conflict of interest According to the AMF, this conflict of interest may be managed

in two different ways: either by a complete absence of inducements (management companies not having

to pay for the distribution of their UCITS any longer), or by the full handover of payments to clients (thus eliminating the conflict of interest arising from the payment by the suppliers of various

inducements, since the portfolio managers remuneration is not affected by the choices he makes

on behalf of his client) The AMF also mentions that to restore their profit margins, portfolio managers should increase their fixed management fee

• Improving customer service and the duty to act in the best interests of clients in the provision of

investment advice

The AMF makes a distinction between remuneration received in the long run and remuneration incentives with threshold effects

• Improving customer service in reception and transmission of client orders services and execution services

The AMF also recommends that when entering into a relationship, the client should be able to choose between:

1 The purchase of an occasional service that would lead to a once off payment

2 The purchase of an occasional service complemented by additional services during the time span of the investment that would lead to continuous remuneration over the same period

The consultation will close on 7 September 2012 The full text is available via the following web link:

http://www.amf-france.org/documents/general/10435_1 pdf

Fund News – June 2012

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The Netherlands

AIFMD Implementation

On 19 April 2012 the Ministry of Finance

submitted a legislative proposal to the

Dutch Parliament for the implementation

of the Alternative Investment Fund

Managers Directive (AIFMD) The

proposed law will amend the Dutch Act

on Financial Supervision (DFSA), the

Dutch Civil Code, the Dutch Economic

Offences Act and several tax laws

Together with this law, the Ministry of

Finance published an explanatory

memorandum and a report issued after

the Council of State had rendered its

advice In addition, the Dutch Ministry of

Finance will adopt a set of rules

implementing the AIFMD via

regulations

The Proposal seeks to implement the

AIFMD on a 1:1 basis However, the

Ministry of Finance has made use of

their freedom of implementation in

several instances where the AIFMD

explicitly permits stricter requirements

or adjustments of the implementation by

the Member States

1 Categories of investment institutions

The Proposal differentiates between two

types of “investment institutions”:

• Investment institutions that are

referred to in the AIFMD as

alternative investment funds

• UCITS

However, the proposed law does not use the word “alternative” when referring to the first type of investment institutions because the Dutch

government expects that most investment institutions will fall into that category and the name could otherwise

be misleading Therefore, all alternative investment funds are referred to simply

as investment institutions Also provisions for the two categories are set out in separate sections of the DFSA

2 Marketing to retail investors The proposed law sets out that marketing of AIFs to non-professional investors in the Netherlands will be subject to additional “Netherlands-specific” requirements These requirements will relate to additional investor disclosures (e.g KID) and further investor protection rules (affiliation to the Dutch dispute resolution institute – KiFiD) However the exact requirements for this are set

to be determined by regulations at a later point

3 Additional services The Proposal allows AIFM’s to perform

“non-core” activities (mentioned in Article 6.4(b) of the AIFMD) that fall within the scope of the Markets in Financial Instruments Directive (MiFID), without needing to obtain a separate MiFID licence A Dutch AIFM would therefore be able to perform following additional services:

• investment advice;

• safe-keeping and administration in

relation to shares or units of funds;

• reception and transmission of orders

in relation to financial instruments

4 AIFM from designated states Currently AIFM from certain countries

do not require a licence to offer services

in the Netherlands as they are assumed

to be subject to adequate supervision in their home state These designated states are Luxembourg, France, Ireland, Malta, the UK, Guernsey, Jersey and the

US (if the manager is SEC registered) Following the implementation of the AIFMD, this designated states regime will become obsolete for EU-AIFM However, the proposed law sets out that AIFMs from Guernsey, Jersey and the US can still rely on the designated states regime after the proposed law comes into effect

5 Depositaries The Proposal introduces a lighter depositary regime for certain closed-end funds that do not allow redemptions within 5 years after the initial investment and do not invest into financial

instruments that need to be held in custody (e.g real estate and private equity funds) Managers of these types

of funds will be able to appoint an entity which carries out depositary functions as part of its professional registration recognized by law or legal or regulatory provisions or rules of professional conduct (e.g notaries and lawyers) The specific requirements for this will be set out in regulations at a later point

Fund News – June 2012

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6 Private placement regime

The proposed law provides that current

private placement rules will stay in force

However, they can only be relied upon

by non-EU AIFMs and “small EU

AIFMs” (i.e AIFMs which are below the

threshold of the AIFMD) All other

AIFMs will have to obtain an AIFM

licence from the Dutch Authority for the

Financial Markets (AFM) In addition,

AIFMs that wish to rely on private

placement will need to register with the

AFM, perform regular filings concerning

their activities and notify the AFM if they

no longer meet the conditions set out in

the proposed law

7 Tax

The current Dutch tax regime sets out

that an entity is considered to be a tax

resident in the Netherlands if its

effective place of management is in the

Netherlands The proposed amendment

to the tax law sets out that AIFs

authorised or registered for the first time

in another EU Member State will not be

considered as a Dutch tax resident even

if managed by a Dutch AIFM, provided

that (a) the AIF is incorporated in that

other EU Member State, and (b) the AIF

invests passively (in accordance with the

special Dutch tax regime of the Fiscal

Investment Institution)

8 Timing

Dutch AIFMs that are authorised before

the new legislation enters into effect

must apply for a licence no later than 22

July 2014 Dutch AIFMs that become

active after the new legislation has

entered into force will have to obtain a

licence before performing any activities

as AIFM

The bill is available here(in Dutch only)

UK

The FSA has proposed to delay for a year the implementation of COBS 14.4

In its quarterly consultation paper number 33 (“CP 12/11”) the Financial Services Authority (“FSA”) has proposed

to defer its implementation of COB 14.4 for 12 months to 31 December 2013 The FSA will consult further but has emphasised that it is not minded to change COBS 14.4 which will require platform operators and nominee companies to provide information and voting rights to the beneficial owners of units in authorised funds The FSA maintains the view that the differences between direct investing and holding units via a nominee are not acceptable and must be reduced, however it accepts that there are issues that need

to be resolved before implementation and will consult further once this extension is in place

CP 12/11 is available via this link and the content is in chapter 8 on pages 42 to

45, and appendix 8 (one page):

http://www.fsa.gov.uk/static/pubs/cp/cp 12-11.pdf

Fund News – June 2012

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Tax News

The Netherlands

CAA with USA re closed FGR

The Netherlands have concluded a new

Competent Authority Agreement (CAA)

with the USA regarding the tax

treatment of a Dutch closed FGR

('besloten fonds voor gemene

rekening')

A closed FGR is treated as tax

transparent for Dutch tax purposes This

implies that all income and gains derived

through such FGR are attributed to the

investors in proportion to their

participations in the FGR FGRs are

frequently used for asset pooling by

pension funds and other investors

In the new CAA the US tax authorities

confirm that a closed FGR will also be

regarded as tax transparent for the

application of the tax treaty concluded

between the Netherlands and the USA

In a earlier CAA (concluded in 2007) it was already agreed to treat a closed FGR as tax transparent in case of Dutch qualifying tax exempt entities (such as pension funds) investing in it

Previously, the Netherlands have concluded similar CAAs with Canada, Denmark, Norway and the United Kingdom Furthermore, in the Protocol

to the new Germany-Netherlands tax treaty (expected to be effective as of 1 January 2014) it is stated that the closed FGR will be treated as tax transparent It

is expected that agreements with other countries will follow

The CAA is available via the following web link:

UK

Reclaims of excess Withholding Tax deducted from dividend and interest income in Taiwan – a ruling for OEICs

Tax ruling No.10104553490 was issued

by the Taiwan Ministry of Finance (“MOF”) on 4 June 2012, and states that UK OEICs are able to apply for the reduced withholding rate pursuant to the Taiwan-UK Double Taxation agreement provided specified documents are submitted A translation prepared by KPMG Taiwan for your reference can be found here

Clarifications from the Taiwan MOF have provided the necessary detail for successful reclaims of withholding taxes

to be filed with the Taiwanese tax authorities Historically, the rates of tax agreed under the tax treaty with Taiwan have not been forthcoming due to the administrative difficulties encountered However, MOF Interpretation Letters provided in 2007 and a subsequent ruling for Authorised Unit Trusts (in 2009) clarified the position to the extent that successful reclaims of withholding tax have now been processed over the last few years The recent ruling will now ensure that the same will apply for

UK OEICs providing certain criteria are met

The process in Taiwan is complicated by the fact that the Foreign Institutional Investor must appoint a tax or business agent in Taiwan in order to apply for the necessary approval letters from the