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Regulatory outlook for 2015 Link’n Learn Leading Business Advisors

Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: [email protected] T: +33 155 616 869 Brian Jackson Partner –Investment Management

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Page 1: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

Regulatory outlook for 2015

Link’n Learn

Leading Business Advisors

Page 2: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

Contacts

Michel Rothilde

Senior Manager – Governance, Risk and Compliance

Deloitte Luxembourg

E: [email protected]

T: +352 45145 4364

Paola Liszka Draper

Senior Manager – Outsourced Solutions

Deloitte Luxembourg

E: [email protected]

T: +352 451 452 803

Markus Schwamborn

Senior Manager– Outsourced Solutions

Deloitte Luxembourg

E: [email protected]

T: +352 451 452 735

John Cotton

Director

Deloitte UK

E: [email protected]

T: +44 20 7007 2345

Aisling Costello

Senior Manager – Investment Management Advisory

Deloitte & Touche Ireland

E: [email protected]

T: +353 1 417 2834

Juliette Ly

Senior Manager - ERS

Deloitte France

E: [email protected]

T: +33155612188

Servane Pfister

Associate Director – ERS

Deloitte France

E: [email protected]

T: +33 155 616 869

Brian Jackson

Partner – Investment Management

Deloitte & Touche Ireland

E: [email protected]

T: +353 1 417 2975

Page 3: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

Agenda

2. AIFMD - Remuneration

1. UCITS

3. AIFMD - Reporting

4. AIFMD - Marketing

5. MiFID

6. Money Market Funds

7. European Long Term Investment Funds

8. European Social Entrepreneurship fund

9. European Venture Capital Fund

Page 4: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

4 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

2015 Timeline

* Estimated timeframes subject to change

Exchange of reportable FATCA info for 2014 by 30 Sept. 2015

2015

I June 2015Companies Act 2014

entry into force*

MMF Parliament consideration

25 March 2015*

Final ICAV Bill enacted* Q1 2015

AIFMD ESMA advice on on-EU passport 22 July

8 Jan 2015 – deadline for AIFMD call for evidence on

non-EU passport

30 Jan 2015• AIFMD - ESMA’s Consultation paper on

asset segregation closes.• AIFMD Regulatory

reporting period ends

27 March 2015Deadline for feedback on

ESMA’s Consultation paper on UCITS share classes

Expected in Q1 2015: Feedback on ESMA’s Revised Guidelines on

ETFs and other UCITS issues*

UCITS Rulebook expected from the

Central Bank*

Expected Q3 2015: Feedback on CP84 *

Implementation of the Fourth AML Directive

(late 2015)*

22 Oct 2015Decision on

non-EU passport

under AIFMD

Q1 2015 Expected publication of Central Bank’s new client

asset requirements*

Expected in Q2 2015: Feedback on ESMA’s

consultation on AIFMD asset segregation*

23 Feb 2015Deadline for

responses to IOSCO consultation on

cross-border regulation

ESMA to submit to Commission final RTS

2nd March Consultation on draft RTS and ITS closes

By 2nd March -ESMA technical advice on delegated acts concerning MAR By 2nd July – ESMA

must deliver to Commission final RTS and ITS on MAR

First clearing obligations likely, but will be subject to phasing in.

5th January -Consultation closes on ESMA guidelines for definition of commodity derivatives under C6 and C7of Annex 1 of MiFID

1st July – Reporting any derivatives for which a repository is still unavailable

1st December – New margin requirements for uncleared derivative trades to be phased in between Dec 15 and Dec 19

31st December – Sunset date for transitional relief for limited branches and limited FFI’s

31st December - ESMA, EBA and EIOPA –Expected to submit to the Commission the draft RTS

ESMA,EBA and EIOPA –Expected to consult on draft RTS on the content, presentation and calculation of info in the KID

30th April –ESMA to submit advice on implementing measures.

22nd July – EU Commission to report on the possibility of allowing social entrepreneurship funds established in a third country to use the “EuSEF” Regulation

1st January – FATCA withholding begins on US FDAP payments on pre-existing accounts of non-documented “prima facie” FFI’s

13th February –ESMA’s consultation on amending trade reporting RTS and ITS closes

16th May – Member State Regulators – MS’s must notify the EU Commission and ESMA about the rules they have implemented on administrative penalties and other measures applicable to breaches of EUSEF Regulation.

Page 5: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

5 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

UCITS V

Page 6: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

6 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

A quick glance

UCITS V

ESMA Discussion Paper

on share classes of

UCITS (23 December

2014)

ESMA Q&A on guidelines

of ETFs and other UCITS

issues (latest edition: 9

January 2015)

ESMA – technical advice

on delegated acts required

by UCITS V

.

• ESMA detected diverging national practices as to the type of share

class permitted

• ESMA wants to develop a common understanding what constitutes a

share class and in which way share classes may differ from each

other

• Responses by 27 March 2015

• New question on efficient portfolio management techniques

• New question on collateral management

• Insolvency protection of UCITS assets when the depositary

delegates safekeeping duties to a third party

• Requirement for the management company and depositary to act

independently

• Feedback provided to EU Commission in November 2014

• Publication of final technical advice anticipated for Q2 2015

Page 7: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

7 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

AIFMD - Reporting

Page 8: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

8 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Everyone is in scope

AIFMD reporting: scoping and timing

Regulatory AUM thresholdsReporting frequency Reporting period

AIFMreporting

< €100 million

< €500 million unleveraged with 5 year lockup period)

Annual Jan to Dec

> €100 million to €1 billion Half-yearlyJan to Jun

Jul to Dec

> €1 billion Quarterly

Jan to Mar

Apr to Jun

Jul to Sep

Oct to Dec

Reporting for specific AIF types

Each AIF > €500 million Quarterly

Jan to Mar

Apr to Jun

Jul to Sep

Oct to Dec

Each unleveraged AIF investing in non-listed companies and issuers in order to acquire control

Annual Jan to Dec

Applicable to any EU AIFM or non-EU AIFM managing or marketing AIFs in EU, regardless of

the AIFM authorisation status

Page 9: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

9 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Reporting obligations for Authorised AIFMs

AIFMD reporting: scoping and timing

ESMA Final report on «Guidelines on reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of the AIMFD – Annex I

Page 10: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

10 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Reporting obligations for Non-EU AIFMs

AIFMD reporting: scoping and timing

ESMA Final report on «Guidelines on reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of the AIMFD – Annex I

Page 11: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

11 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Large volume of information from multiple sources

AIFMD reporting: overview of requirements

FA

Identification of the

AIF

Instruments traded

and individual

exposures

All this data should be populated in a static database:

• Name of AIF and AIFM - EU or non-EU

• Identification codes

• Domicile

• Prime broker name

• Base currency (ISO) and

• Jurisdictions of the 3 main funding sources !

• Predominant AIF type (based on list)

• AuM

• Breakdown of investment strategies (based on list) and

% NAV

Static

Data

Combination of position files for usual securities and

derivatives and security master file (geographical

breakdown, markets)

Investor concentration (look-through whenever possible)

Long/short values (by types, by currency)

Turnover in each asset class

Typical deal and position size for PE

Dominant influence for PE

FA

FA

Static

Data

TA

Static

Data

Principal exposures

and most important

concentrations

Static

Data

#1 Huge volume of data

• The report template (for 1 AIFM

/ 1 AIF) is 19 pages long !

• The field description proposal is

40 pages long !

#2 Multiple sources to manage

• Man Co for static data

• Fund Accounting for portfolio

and NAV data,

• Transfer Agent for investor

details

• Custody for collateral and

derivatives positions

• Risk for risk analysis and data

• …AIFs managed by an AIFM

may use different providers…

Page 12: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

12 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Large volume of information from multiple sources

AIFMD reporting: overview of requirements

Risk Profile of the

AIF

Results of stress

tests

• Market risk profile

• Counterparty risk profile

• Operational and other risks aspects

• Liquidity profile, including investor redemptions details

• Borrowing and exposure risk incl. leverage

Risk

• Free text describing the risks associated with each

investment position

• Their overall effect on the AIF’s portfolio can be properly

identified, measured, managed and monitored on an

on-going basis

• Results of stress tests

TA

Custody

#3 Multiple formats

• Static data

• Dynamic data

• Numeric data

• Long descriptive text data

#4 Data content creation

• Likely gap in data sources –

who will create the original

data?

#5 Data re-work

• Aggregation

• Enrichment

• Mapping

#6 Coordination

• Quality assurance

• Completeness

• Consistency

#8 Scoping & monitoring

• Ongoing monitoring may be

required to ensure right reporting

scope (incl. new AIF, thresholds,

countries of distribution)

#7 Reporting frequencies

• Annual, semi-annual, quarterly

Risk

Page 13: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

13 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

NAV

FDI

Portfolio

Debt

Capital

Portfolio

AuM

FDI

AUM vs NAV

AIMFD reporting ESMA Q&A update

AUM (Asset Under Management) vs NAV (Net Asset Value) (Q&A 38, 39, 41)

Numerous fields in Annex IV refer to AUM, ESMA clarified that AUM calculated as per art. 2 of the implementing Regulation

should used and not the NAV

AUM should be calculated the absolute value of all assets it manages, without deducting liabilities, and valuing financial

derivative instruments (FDIs) at the value of an equivalent position in the underlying assets.

AUM might be significantly different from NAV

Conversion annex II formula

Page 14: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

14 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Reporting frequency for non-EU AIFM

AIMFD reporting ESMA Q&A update

Non-EU AIFM should calculate a unique frequency (Q&A37)

Non-EU AIFM

Non-EU AIF

1EU AIF 2

Non-EU AIF

3

AuM: 400M€ AuM: 650M€ AuM: 700M€

Non-EU AIFM marketing its AIF’s in several member states

under the national placement regime should calculate a

unique reporting frequency based on all EU AIF’s and all

AIFs marketed in the EU

Illustration:

The AUM figures to be used in this case are

Non-EU AIF 1 + EU AIF 2

400M€ + 650M€ = 1.05bn€

Therefore, the AIFM will reach AUM above one billion

EUR, hence will have quarterly reporting obligations

towards both the UK and French competent authorities for

the relevant AIF:

• Non-EU AIF 1 in the UK

• EU AIF 2 in France

InvestorsInvestorsInvestors

∑ AuM = 1.05bn€

AMFFCA

Quarterly reporting obligations

to each competent authority

Page 15: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

15 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Use of estimates of the NAV

AIMFD reporting ESMA Q&A update

When final NAV is not available AIFM should use estimates of NAV (Q&A 40)

T T + 1 T + 2

ESMA does not clarifies if materiality threshold could be applied on difference between estimated NAV

and final NAV, nor when the updated annex IV report should be submitted

***NEW*** ESMA acknowledged that for illiquid assets, previous NAV can be the best estimation

Final NAV

Reporting Amended

reporting

If the final NAV is not available within 30 days (or 45

days for fund of fund) or no longer representative:

• AIFM should use estimates of NAV.

If there is a difference between the estimated NAV and

final NAV:

• AIFM should send updated report afterwards

***NEW*** When calculating monthly performance

(NAV, net and gross returns) if NAV not available

• AIFM should use estimates of NAV.

Estimated NAV

If difference

***NEW*** = ESMA update dated 9th January 2015

Page 16: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

16 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Reporting when marketing period ended

AIMFD reporting ESMA Q&A update

Reporting requirements are based on investors and not marketing period (Q&A 36)

For non-EU AIFMs marketing AIFs under national placement regime should,

reporting obligations to national competent authorities are:

• Not based on the actual marketing period

• Based on existence of investors in the AIF in the jurisdiction of the

authority concerned.

As illustrated, with investors in UK, France and Luxembourg, the Non-EU

AIFM must continue to report towards all three national competent

authorities.

Non-EU AIFM

Non-EU AIF 1

Investors

AIF’s who stopped marketing in

the EU, must continue reporting

Therefore, non-EU AIFMs should continue to report to national competent

authorities after the marketing period has ended unless they confirm that no

investors in the jurisdiction of the authority concerned are invested in the AIFs.

AMFFCA CSSF

Page 17: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

17 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

January

Reporting for Fund of Funds AIF

AIMFD reporting ESMA Q&A update

***NEW*** Reporting deadline for AIFM with standard and funds (Q&A 53)• AIFM ABC with two AIFs:

• AIF A – Hedge fund (AuM = 30M€) >> reporting due 30 days

• AIF B – Fund of funds (AuM = 50M€) >> reporting due 45 days

Two different reporting deadlines:

Reporting for AIF A

Reporting for AIF B

Reporting for AIFM ABC

February

AIFM managing fund of funds AIFs and other AIFs, will have to report in two steps:

• Within 30 days for other AIFs

• Within 45 days for fund of funds AIFs and aggregated AIFM data

30 days

45 days

Page 18: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

18 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

AIFMD - Remuneration

Page 19: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

19 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

AIFMD remunerationAIF annual report remuneration disclosure – key questions

Key questions on remuneration disclosure

Quantitative disclosure

Aggregate pay of the AIFM vs. breakdown

by AIF?

Misalignment of AIF financial year with AIFM performance

period?

Identified Staff performing a mix of AIFM and non-AIFM

activities?

Qualitative disclosure

Level of detail of remuneration policy to

disclose?

Scope of the disclosure

Inclusion of delegates?

First disclosure/ transitional rules

National regulator guidance?

AIF A accounting period

AIF B accounting period

Bonus

Payment

AIFM performance period

1 Jul. 2015 30 Jun. 2016

1 Apr. 2015 31 Mar. 2016

1 Jan. 2015 31 Dec. 2016 31 Dec. 2017

Bonus

Payment

Bonus

Payment

What to disclose in respect of each AIF?

Page 20: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

20 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Investment management remunerationAreas of focus for 2015

Review remuneration structures and governance in preparation for UCITS V implementation in 2016

(ESMA consultation paper expected before Summer 2015)

DISCLOSURE

Finalise approach for AIFMD disclosurerequirements

RISK ADJUSTMENT

Finalise the operational implementation of malus/clawback

REWARD STRUCTURES

Review remuneration structures to ensure fit for purpose -business strategy, conduct, culture and risk

GAP ANALYSIS

Ensure fully compliant with all aspects of the requirements

AIFMD

UCITS V

Page 21: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

21 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

AIFMD - Marketing

Page 22: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

22 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

AIFMDTimeline for marketing in the EU

EU AIFM & EU AIF

EU AIFM & Non-EU AIF

Non-EU AIFM & EU AIF

Non-EU AIFM & Non-EU AIF

22 July 2013 2014 2015 2016 2017 2018 2019

Deadline for

implementation

of AIFMD in

Member States

Grandfathering

provisions re.

delay to apply

for AIFM licence

ESMA decision on

availability of the EU

passport for non-EU

AIFM and non-EU AIF

ESMA decision on

abolishment of

national placement

regimes

* Passport anticipated end 2015 / early 2016 depending on ESMA opinion to be issued in July 2015

** Member States may decide at their own discretion to end National Placement regimes anytime prior to 2018

EU Passport

EU Passport*

EU Passport*

EU Passport*

National Placement **

National Placement **

The AIFM Directive foresees different timelines for making an EU distribution passport available, and for ending EU National

Placement regimes **.

• Prior to 2018, marketing in the EU via either an EU passport or National Placement Regimes is, in principle, possible.

• After 2018, only marketing through an EU passport will be possible.

Page 23: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

23 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Distribution under AIFMD Your current marketing options if the AIFM is unable to access the EU passport

• Full fledged and most costly option

• Preferred solution from a regulatory standpoint if you

actively raise capital in the EU or wish to have easier

market access to EU investors

• Possibility for efficient solutions leveraging existing

infrastructure and potential fund restructuring to minimise

cost impact for non-EU investors

Do Nothing

• Not an option if you raise

capital or approach

investors in the EU

Reverse Solicitation

• Sometimes presented as a possible “option”

but

• is not a strategy for raising capital in the

EU

• requires complexity in demonstrating total

absence of marketing

• poses a major future compliance risk as

cooperation is foreseen between EU and

non-EU authorities

Wait until the Passport……..Opt for National Placement in the interim

• Best “low” requirements

• Possible until 2018, uncertain thereafter

• Specific regulatory requirements

• National Placement Regimes are not

harmonised

• Prudential reporting to both regulators and

investors in each jurisdiction where the AIFs

are distributed

Page 24: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

24 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

MiFID

Page 25: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

25 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Impacted potentially actors:

Investment services provider, Bank, Asset manager, Product manufacturer, Broker dealer…

MiFID’s Key concepts

KEY Concepts

1- Independent advice

2- Third party payments

3- Suitability

4- Client information

Regulatory context:

• Last December, ESMA published its final report on technical advices

• and launched a consultation on technical standard

• Based on these advices, the European Commission will establish delegated acts

5- Client report

6- Investment research and bundling

costs

7- Product governance and target

market

Page 26: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

26 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Independent advice

A choice of the advisor

Can’t receive and retain third party payments (TPP), including non monetary non

minor TPP

Provide a large range of products and manufacturers with an appropriate proportion

of “in house” products

Third Party Payments

Banned for independent advisors and discretionary portfolio managers

For other investment services, should be justified by the provision of an additional

service at a competitive price (the service quality enhancement)

An ongoing TPP should support an ongoing service

Suitability

In the case of investment advice, provide an adequacy report to the client (before

subscription)

Assess the ability of the client to assume the risk of the product

Page 27: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

27 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Client information

On the behaviour of the product in different market situation

On the total cost and charges of the service and the product, ex ante and ex post

Client report

For all investment services, including ongoing advice

In case of portfolio management, client report should be provided each quarter to

retail client

Inform the client if the managed portfolio experiences a 10% depreciation

Investment research/bundling costs and Product governance/target market

Proposal to distinguish investment research costs and dealing costs

Identify a target market for each product

See the very clear UK Blog

Page 28: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

28 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

• Money Market funds• European Long Term Investment Funds• European Social Entrepreneurship fund• European Venture Capital Fund

Page 29: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

29 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

“Shadow banking” concerns

Regulation on Money Market Funds

The European Commission released its draft

Regulation on Money Market Funds (MMFs) on

4 September 2013. The proposal seeks to

address the risk that investor “runs” could affect

market stability and includes a controversial 3%

capital buffer for constant NAV (CNAV) money

market funds. A draft report from the Economic

and Monetary Affairs Committee (ECON) of the

European Parliament sought to go further in

phasing out CNAV funds entirely.

On 29 September 2014, the European

Parliament updated its procedure file on the

proposed Regulation on MMFs. ECON will

consider the MMF Regulation in a committee

meeting on 23 February 2015 and Parliament

will then consider the Regulation in its plenary

session to be held in March 2015.

CNAV funds Eligible assetsDiversification &

concentration

Credit rating

agenciesExternal support Transparency

Credit assessment Liquidity management Valuation

Page 30: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

30 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Advent of a two-tier Europe?

European Long-term Investment Fund

ELTIF

Risk spreading and

concentration rules

Long-term illiquid

investments

Retail and institutional

Publication of a KID

70% in eligible investment

assets

AIFMD passport

Closed ended

Authorisation

The European Long-term Investment Fund

(ELTIF) is a new product aimed at promoting

sustainable long-term investment in the

European economy. Its focus is on investment

in long term projects including infrastructure,

sustainable energy, new technologies.

As ELTIFs are available to both retail and

institutional investors, they potentially herald the

advent of a two-tier fund scenario in Europe:

AIFs which are passportable to professional

investors under AIFMD, and ELTIFs which are

also passported under AIFMD to retail investors.

ELTIFs are being introduced by regulation and

therefore will be directly binding in EU member

states without gold-plating.

The final text was agreed in Trialogue in

December in 2014.

Page 31: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

31 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Supporting social entrepreneurs

European Social Entrepreneurship Fund (EuSEF)

The European Social Entrepreneurship Funds (EuSEF)

Regulation applies from 22 July 2013 and introduces a

marketing passport to allow fund managers to market

qualifying social entrepreneurship funds to EU investors

.

It aims to make it easier for social enterprises to raise

funds across Europe by:

Creating a designation (that is, a brand) of

"European Social Entrepreneurship Fund" or

"EuSEF", which can be used by funds that meet

prescribed conditions

Setting out a framework for a marketing passport,

which allows funds with EuSEF status to be sold to a

wide range of European investors.

ESMA published a set of Q&A on the EuSEF Regulation.

A regulation setting out implementing technical

standards to determine the format of notification under

Article 17 of the EuSEF Regulation came into force on 7

June 2014. In September 2014, ESMA consulted on its

technical advice; it will provide this advice to the

European Commission by 30 April 2015.

Social

entrepreneurship

criteria

EU passport

AIFMD lite

Professional

investors

Annual report

EuSEF

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32 Link’n Learn – Regulatory Outlook for 2015 © 2015 Deloitte & Touche

Investing in the SME sector

European Venture Capital Fund

The European venture capital industry is fragmented and

dispersed and has been hampered from growing by the lack of a

common EU regulatory framework. With SMEs finding it difficult

to access bank credit following the financial crisis, the EU has

sought ways to open up non-bank lending to the SME sector.

AIFMD creates a new EU distribution passport for AIFMs

marketing to professional investors. However, the smaller scale

of the venture capital industry means that many of these

managers would fall below the de minimis thresholds and would

have to opt in to the full compliance regime to avail of an EU

passport, placing greater cost on these below threshold firms.

In order to promote the development of a cross-border venture

capital industry to boost investment in SMEs, a regulation on

European Venture Capital Funds (EuVECAs) was adopted. The

EuVECA regulation took effect on 22 July 2013 to coincide with

the implementation of AIFMD.

On 26 September 2014, ESMA published a consultation on its

technical advice to the European Commission on implementing

measures. The deadline for responses to the consultation is 10

December 2014. ESMA will submit its technical advice to the

European Commission by April 2015.

SME criteria

EU passport

AIFMD lite

Overlay to local

VC regimes

Professional

investors

Annual report

EuVECA

Page 33: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

Q&A

Page 34: Link’n Learn - Deloitte United States...Servane Pfister Associate Director –ERS Deloitte France E: spfister@deloitte.fr T: +33 155 616 869 Brian Jackson Partner –Investment Management

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