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    ALFI Newsflash june 30, 2015    
          in this edition      
    1. Headlines
2. News from ALFI's Asia representative office
3. Upcoming ALFI events
4. Events endorsed by ALFI
5. Professional training
     
 
 

1.

Headlines

ALFI offers guidance for due diligence information packs

It is a regulatory requirement that the board of a Fund, the Management Company or the Alternative Investment Fund Manager ("AIFM") remain responsible for the activities delegated to third parties and the need to oversee their activities and performance. With a view to simplify and facilitate initial and ongoing due diligence reviews, an ALFI working group under the aegis of the ALFI Fund Governance Forum was created to consider whether the different approaches taken to due diligence on delegates by the boards of Luxembourg funds, management companies, and AIFMs could be more consistent.

The Working Group has now finalised a Framework for Due Diligence Information Packs for service providers acting as central administrators and/or depositary/custodian.

This framework seeks to provide a table of contents upon which service providers (delegates) to which a fund Board, Management Company or AIFM has delegated activities and services can base their preparation of documentation required to support the initial and ongoing due diligence reviews of a fund and/ or its Management Company under Luxembourg regulations. The document should not be considered as an exhaustive list of areas for delegates to cover, nor a prescriptive guide on the approach to a due diligence process. It is intended to facilitate an effective due diligence process for the delegates as well as those undertaking due diligence.

Download the document here.

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ALFI issues a second Q&A on reporting and withholding in the context of FATCA

On 27 March 2015, the Luxembourg draft law on FATCA was submitted to Parliament. The law will ratify the execution of the Intergovernmental Agreement (IGA) signed between Luxembourg and the United States of America on 28 March 2014 as well as the related Appendices and Memorandum of Understanding. It is expected that the law will be passed in the coming days.

In this context, ALFI's implementation working groups for FATCA prepared a Q&A document to deal specifically with reporting and withholding issues in the context of FATCA. It should be read in conjunction with a first Q&A prepared by ALFI on the implementation of FATCA in the context of Luxembourg domiciled investment funds, which you may download from the website of ALFI. The Q&A does not aim to address all existing cases. Click here to access the Q&A.

(Read more)

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ALFI takes position on limits on exposures to shadow banking entities

On 19 June 2015 ALFI responded to the EBA consultation paper on draft guidelines on limits on exposures to shadow banking entities. The EBA proposes, in the absence of a definition of “shadow banking entities”, to include alternative investment funds and money market funds under the definition of shadow banking entities which carry out banking activities outside a regulated framework. To read the full response please click here.

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ALFI comments on the OECD’s Revised Discussion Draft on preventing treaty abuse

ALFI has taken note of the OECD Revised Discussion Draft “BEPS Action 6: Prevent Treaty Abuse” dated 22 May 2015. This follows a previous consultation “Follow up Work on BEPS Action 6: Preventing Treaty Abuse” to which ALFI responded on 9 January 2015 (click here to access the previous response). These two consultations must be read in conjunction with the report “BEPS Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances”.

ALFI’s response addresses the situation of collective investment vehicles (“CIVs”) being widely-held, diversified, and subject to investor-protection regulation in the country of establishment of the CIV, as previously defined by the 2010 OECD report on treaty eligibility for investors in CIVs and section A of the Follow-up Discussion Draft relating to the limitation-on-benefits (LOB) provision and treaty entitlement.

ALFI again takes the view that CIVs set-up as UCITS or non-CIVS with similar characteristics should automatically qualify as resident under article 1 of the OECD Model Tax Convention as well as for the LOB rule. CIVs and UCITS are principally set up for genuine commercial reasons and given their economic characteristics it is reasonable to conclude that CIVs cannot, in principle, be effectively used for treaty shopping.

Finally, ALFI also suggests to include a statement that Contracting States are encouraged to consider that UCITS and comparable non-CIVs will not be considered as creating opportunities for treaty shopping.

You may access ALFI’s response here.

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ESAs seek feedback on KIDs for PRIIPs

On 23 June 2015, the Joint Committee of the European Supervisory Authorities (ESAs) – EBA, EIOPA and ESMA – has published a technical discussion paper on risk, performance scenarios and cost disclosures for Key Information Documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs). The Joint Committee is looking for feedback from all concerned stakeholders by 17 August 2015. The technical discussion paper aims to collect views on the possible methodologies to determine and display risks, performance and costs in the KID. The paper is split into a section on risk and reward and a section on costs. A number of different methodological options are identified for each element of disclosure.

The ESAs are mandated by the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs Regulation) to develop draft Regulatory Technical Standards (RTS) on the content and presentation of the KIDs for PRIIPs. The aim of the KIDs is to provide EU retail investors with consumer-friendly information about investment products with the ultimate aim of improving transparency in the investment market. The ESAs issued a first discussion paper in November 2014 seeking stakeholders' general views on how these standardised KIDs should be developed.

ALFI and EFAMA responded to the first discussion paper, and will also respond to the technical one.

The ESAs expect to follow this technical discussion paper with a final consultation paper setting out the draft RTS under Article 8 of the PRIIPs Regulation in the autumn of 2015. A separate consultation paper will also be published for the draft RTS under Articles 10 and 13. The draft RTS on Article 8 will then be finalised and submitted to the European Commission by 31 March 2016, as set out in the PRIIPs Regulation.

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Volcker Rule agencies issue new FAQ addressing foreign public funds issues

As a result of an intense lobbying from EFAMA and other stakeholders, the Volcker Rule agencies published two new FAQs, one of which (FAQ 14) addresses the foreign public funds issues. In brief (and paraphrasing slightly), it indicates that a qualifying foreign public fund shall not be deemed to be a banking entity as a result of the governance relationships it has with the sponsoring banking entity so long as, after an appropriate seeding period, the sponsoring banking entity owns less than 25% of the foreign public fund’s outstanding voting shares. The relief provided by the Volcker Agencies effectively tracks the second of the three approaches that EFAMA had suggested in its 16 October 2014 letter to the agencies.

However, it is worth noting that FAQ 14 does not provide any relief for those foreign funds that do not qualify for the foreign public fund exclusion from covered fund status, such as would be the case for alternative investment funds (“AIFs”) organised and offered under the AIFMD. Accordingly, there remains the potential for such AIFs to be considered banking entities because of their governance structure. In the worst case, the AIFs will be deemed to be banking entities and would need to comply with the requirements of the trading outside the United States (“TOTUS”) exemption from the proprietary trading restrictions. While it would be possible for AIFs that are controlled by non-U.S. banking entities to comply with TOTUS, there are good arguments that they should not be treated as banking entities any more than comparable AIFs that are organised by US banks, but are deemed to be covered funds. The fund industry will continue its lobbying efforts to achieve a similar relief for AIFs so long as the sponsoring banking entity of an AIF does not own 25% or more of the fund’s outstanding shares.

Background information: ALFI newsflash of 27 January 2015

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2.

News from ALFI's Asia representative office

Taiwan launches incentive program for onshore funds promotion

The Financial Supervisory Commission in Taiwan (FSC) officially launched an incentive program to promote onshore funds. Applications from securities investment trust enterprises (SITEs) are expected until end-June and the eligibility is for a period of one year.

SITEs, which are allowed to sell both onshore and offshore funds, under the condition of fulfilling certain basic criteria are eligible for incentives such as: streamlined fund application procedure for products that invest in alternative assets, including the very popular convertible bonds, relaxation of some investment limits on certain types of assets on a case-by-case basis or simplified regulatory requirements for investment management. Moreover, the regulator also welcomes SITEs to submit other incentives of their choice for consideration by the regulator.

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Malaysia reforms funds approval regime

The Securities Commission of Malaysia (SC) announced in a press release that the new regime for fund and product approval is taking effect according to the “Guidelines on Unlisted Capital Market Products” issued previously. This reform aims at reducing significantly the time-to-market of new products.

The Lodge and Launch framework can be found following this link.

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Philippines issue guidelines on trust corporations

On June 17, the monetary board of the Philippine’s central bank, Bangko Sentral ng Pilipinas (BSP) approved new guidelines on the establishment and operation of Trust Corporations (TCs).

TCs will engage funds management activities under either a trustor-trustee arrangement or an agency type of agreement.

Changes include: minimum capitalization of trust corporations, “capital adequacy” as an additional component in evaluating the operations of a trust corporation, expansion and implementation of sound risk management as well as corporate governance practices.

The new guidelines are expected to increase competition and thereby the number of players within the asset management industry while enhancing governance standards and product innovation, to the benefit of investors. 

The official press release can be found following this link.

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South Korea announces a temporary capital gains tax exemption

On June 25, South Korea’s Ministry of Strategy and Finance announced a temporary capital gains tax exemption for newly launched overseas equities funds. Currently, Korean funds investing overseas are subject to a 15.4% capital gains tax. This new measure is not applicable to existing funds.

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3.

Upcoming ALFI events

6 July: ALFI Roadshow to Frankfurt

Already 360 people registered!

Registration still possible - Click here

Feel free to tell your contacts in Germany!

Events page

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14 September: ALFI Golf tournament

It is our pleasure to inform you that the ALFI Golf Tournament is now open to ALFI members for sponsorship!

The event takes place on the day before the ALFI Global Distribution Conference in association with NICSA and HKIFA (15 & 16 September) and profits are donated to charity.

Only a few sponsorship opportunities remain available: click here

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15-16 September: ALFI Global Distribution Conference

The conference will be delivered in association with the National Investment Company Service Association NICSA and the Hong Kong Investment Funds Association, HKIFA.

Open for registration! Click here                            

Programme online - click here

Sponsorship & Exhibition opportunities from EUR 3,000 for ALFI members

  • Sponsorship & Exhibition Benefits overview - click here - Third round booth allocation: Friday, 10 July
  • Agreement forms - click here

Keeping with its tradition and building on Luxembourg's position as a leading hub for cross-border fund distribution, the conference programme will focus on legal, regulatory, economic, political and technological developments that are likely to impact cross-border fund distribution.

Event webpage

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5 - 8 October: Latin America Roadshow

Opening speech by Minister Pierre Gramegna in Colombia

Sponsorship opportunities. Click here

Event webpage

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14 October: ALFI Leading Edge Conference in London

"New rules of the game for global distribution" is the topic of ALFI's next Leading Edge Conference in London.

Sponsorship opportunities – click here.

Registration – opening soon!

Fees from only 160 pounds for early bird bookings before 11th September!

Team deals from 5 registrations!

50 free tickets  for international asset managers and institutional investors who are not based in Luxembourg

Event webpage

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28 & 29 October : ALFI Roadshow to Switzerland (Geneva & Zurich)

Sponsorship open to ALFI members only. Click here.

Event webpage

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18 November: ALFI TA Forum

Save the date!

More information coming soon.

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24 November 2015: ALFI Leading Edge Conference

The next ALFI Leading Edge Conference will be dedicated to product & investors taxation:

  • Tax Reporting (German Tax, Austrian Tax.)
  • FTT
  • FATCA
  • TiSA
  • Reclaim processes

Sponsorship opportunities: click here

Event webpage

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19 & 20 January 2016: ALFI European Alternative Investment Funds Conference

As Luxembourg is taking over the EU Presidency  in the second half of 2015, the European Convention Center Luxembourg(formerly known as the NCCK ) in Luxembourg-Kirchberg, that used to host our event, will not be available.

It has therefore been decided to exceptionally postpone the 2015 edition of the ALFI European Alternative Investment Funds Conference to 19 & 20 January 2016.

Open for Sponsorship & Exhbition – click here.

Event webpage

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ALFI events calendar

For an overview of all events scheduled or endorsed so far by ALFI, have a look at the ALFI events calendar.

Check out all upcoming events. Click on  "Search Events" to filter by event type.

Note: the event calendar allows to have events listed either chronologically or by event category. Click on the name of the event for detailed information.

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4.

Events endorsed by ALFI

Special discounted rates for ALFI members

ALFI has agreed to support a certain number of selected international third-party events that are listed on the exclusive ALFI member events calendar ! Click on the name of the event to get your ALFI member discount code.

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5.

Professional training

IFBL/ALFI 2015 Fund Industry Training – 2nd Semester Subscriptions in Progress

The full IFBL / ALFI training offer is available to you in the second semester 2015. Following a period of strong demand, the IFBL will be adding additional dates to the calendar for a number of modules that are not currently listed. Details for these courses will be provided in the next ALFI Newsflash. Should you have specific needs, the IFBL warmly invites you to signal these to their customer service team, in order that they may be aware of them for course planning purposes.

Should you be in the process of making your 2nd semester training decisions and require assistance, the IFBL is at your disposition, either for an individualised meeting (contact Ben Lyon on 465016 – 465 / lyon@ifbl.lu) or via their customer service team for more general inquiries and subscriptions (465016-1 / customer@ifbl.lu).

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