1 LEGAL & REGULATORY

1.1 UCITS Update

There have been a number of developments over the quarter:

UCITS V Legislation

The UCITS V Directive 2014/91/EU ("UCITS V") entered into force on 18 March 2016. The European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2016 became effective on 21 March 2016 thereby implementing UCITS V into law in Ireland. European Commission Delegated Regulation ((EU) 2016/438 supplementing the UCITS V Directive with regard to obligations of depositaries (the "UCITS V Level 2 Regulation") came into force on 12 April 2016 and will apply from 13 October 2016.

Amendments to the Central Bank UCITS Regulations – CP 105

ESMA and Central Bank Q&As

On 5 April 2016 the European Securities and Markets Authority ("ESMA") issued an updated Q&A which includes a new question and answer on master-feeder structures which confirms that as UCITS feeder funds have to invest at least 85% of their net assets in their UCITS master fund, another UCITS cannot invest in a UCITS feeder fund.

On the 2 June 2016, the Central Bank published a thirteenth edition of the UCITS Q&A. The new questions added are: ID 1063 (UCITS Management Company - organisational effectiveness); ID 1064 (share class hedging); and ID 1065-ID 1066 (Companies Act 2014). (ID 1065 was previously issued as a general information note on 12 June 2015.) ID 1013 on past performance data has been amended and the heading of this section has been revised also.

UCITS Share Classes

On 6 April 2016 ESMA published a discussion paper on UCITS share classes. In the paper ESMA observes that it has identified diverging national practices EU regarding the types of share class that are permitted and therefore proposes establishing a common regulatory framework for share classes in the EU. The paper describes the nature of share classes, the reasons for their existence and the key elements of share classes and puts forward a revised, principles-based approach. The consultation closed on 6 June 2016.

Maples led the cross-industry delegation that responded to the consultation on behalf of Irish Funds.

For more information see our client update, ESMA Issues UCITS Share Class Discussion Paper – Currency Hedging Endorsed.

Compliance Table - Guidelines on ETFs and Other UCITS Issues

On 12 April 2016 ESMA published a compliance table setting out the national competent authorities that comply or intend to comply with the Guidelines on ETFs and Other UCITS Issues.

1.2 AIFMD Update

The European Union (Alternative Investment Fund Managers) Regulations 2013 gave effect to Alternative Investment Fund Managers Directive ("AIFMD") in Ireland in July 2013. There have been a number of developments over this quarter:

Central Bank and ESMA Q&As

On 5 April 2016, ESMA published an updated version of its Q&A paper on the application of AIFMD. The amendment relates to the notification of alternative investment funds ("AIFs").

On 3 June 2016, ESMA published another update to reflect new Q&As relating to: requirements regarding the domicile of EU AIFs that are marketed in the home member state of the alternative investment fund manager ("AIFM"); the marketing of EU feeder AIFs that have a non-EU master AIF; and the influence that committed capital can have on the calculation of the total value of assets under management and additional own funds. It states that as a general rule, committed capital does not contribute to the actual assets of the AIF for which it was pledged, as long as it has not been drawn down by the AIFM. However, Article 2 of Commission Regulation 231/2013 makes reference to national valuation rules as well as to rules on valuation contained in the AIF rules or articles of incorporation. Committed capital should therefore be taken into account in the calculation of total AUM if national rules foresee this.

On 2 June 2016, the Central Bank published a nineteenth edition of its AIFMD Q&A. The new questions added are: ID 1104 (Fund Management Company - organisational effectiveness); ID 1105 (Rules - significant Influence in the context of certain types of AIFs); and ID 1106-ID 1107 (Companies Act 2014). (ID 1106 was previously issued as a general information note on 12 June 2015.)

AIF Rulebook Feedback

On 2 June 2016 the Central Bank also published its feedback statement CP99: Consultation on Amendments to the AIF Rulebook which summarises the responses received along with the Central Bank's comments. The Central Bank confirmed that the AIF Rulebook will be converted into regulations to be published under section 48 of the Central Bank (Supervision and Enforcement) Act 2013 and that those regulations will be published in draft form for consultation. No timeframe was specified for this.

ESMA Compliance Tables

On 7 April 2016 ESMA published a compliance table on the Guidelines on Key Concepts of the AIFMD and on the guidelines on Reporting Obligations under Articles 3(3)(d) and 24(1),(2) and (4) of the AIFMD. On 4 May 2016 it published a compliance table on the guidelines on Sound Remuneration Policies under AIFMD. They all set out the national competent authorities that comply or intend to comply with each set of guidelines.

1.3 CP86 Third Consultation: Fund Management Company Effectiveness

The Central Bank has been engaged in a body of work to improve fund management company ("ManCo") effectiveness since early 2014. It issued a third consultation paper on Fund Management Company Effectiveness on 2 June 2016. The paper addresses managerial functions (primarily regarding the use of designated persons), operational issues (ManCo recordkeeping) and procedural matters (authorisation processes for new ManCos).

It sets out the work already undertaken by the Central Bank in relation to governance of Mancos and outlines the proposed approach to compliance and supervisability issues. Respondents are invited to comment on the proposed rules and guidance by 25 August 2016.

For more information see our client update, CP86: Fund Management Company Effectiveness - Use of Designated Persons.

1.4 Directors' Compliance Statement and Audit Committees

Sections 167 and 225 of the Companies Act 2014 ("Section 167" and Section 225" respectively) imposes new obligations on directors in relation to certain companies to which they have been appointed to include (i) a statement as to whether the company has established an audit committee or not, and if not the reasons for that decision; and (ii) a directors' compliance statement in the directors' report that accompanies a company's annual financial statements.

Any company which has been established as an investment company which is subject to the UCITS Regulations is required to comply with Sections 167 and 225 for accounting periods that commence on or after 1 June 2015.

Sections 167 and 225 do not apply to other "investment companies" (as defined in the Companies Act 2014) which are investment companies that are not subject to the UCITS Regulations, but which are regulated by the Central Bank and fall within Part 24 of the Companies Act 2014.

Section 167 – audit committee

Section 167(2) introduces an obligation for companies to establish an audit committee and their decision must be documented in the directors' report. If they decide not to establish the committee, they must explain the reasons for their decision in the report.

Such audit committees must include at least one independent non-executive director who is not involved in company's day-to-day management and who has competence in auditing or accounting. Its responsibilities include, but are not limited to the monitoring of: the financial reporting process; the effectiveness of the company's systems of internal control, internal audit and risk management; the statutory audit of the company's statutory financial statements; and the independence of the statutory auditors.

Section 167 applies to "large companies" which are Irish-incorporated companies, other than "investment companies" (for example, private limited companies ("LTDs"), designated activity companies ("DACs"), guarantee companies ("CLGs"), unlimited companies and investment companies which are subject to the UCITS regulations), where: (a) the balance sheet total of the company for both the most recent financial year and the immediately preceding financial year exceeds €25m and the turnover for that year exceeds €50m; or (b) a company has one or more subsidiary undertakings, if the company and all those subsidiary undertakings together, in both the most recent financial year of that company and the immediately preceding financial year, meet the criteria set out in (a).

Section 225 – directors' compliance statement

Section 225(2) requires the directors to make certain statements in the directors' report prepared for each financial period to be included in the company's annual financial statements:

1. acknowledging that they are responsible for securing the company's compliance with its relevant obligations (as that term is defined in the Companies Act) applicable to the company, being obligations which are a category 1 or 2 offence under the Companies Act, tax law, a serious market abuse offence or a serious prospectus offence as applicable (the "Relevant Obligations"); and
2. confirming that each of the obligations in Section 225(3), have been satisfied or, if not, specify the reasons why they have not been satisfied. These obligations are:
   
   
   1. drawing up a compliance policy statement to ensure compliance with the company's Relevant Obligations;
   2. put in place appropriate arrangements or structures designed to secure material compliance with the Relevant Obligations; and
   3. review each financial year any those arrangements or structures

Irish incorporated companies (for example, LTDs, DACs and CLGs) are outside the scope of the Section 225 requirement if the company's balance sheet total for the financial year in question is less than €12.5m or if its turnover for that year is less than €25m. Further, this obligation does not apply to unlimited companies.

1.5 EMIR Update

The European Market Infrastructure Regulation (Regulation on OTC derivative transactions, central counterparties ("CCPs") and trade repositories (Regulation 648/2012)) ("EMIR") is relevant to all Irish funds trading in financial derivative instruments ("FDI") whether on an exchange or otherwise. There have been a number of developments over the quarter:

On 13 April 2016 ISDA published an updated version of its classification letter that enables counterparties to notify each other of their status for clearing and other regulatory requirements under EMIR. The OTC clearing obligation applies when an in-scope contract is concluded between two financial counterparties or non-financial counterparties with OTC exposures in excess of the clearing thresholds, and has extraterritorial application, including when an Irish fund faces an entity established in a third country that would be subject to the clearing obligation if it were established in the EU.

The regulatory technical standards ("RTS") on the clearing obligation for certain credit derivative contracts came into force on 9 May 2016. It applies the OTC clearing obligation to certain index credit default swaps. Clients should consult with their relevant contact at Maples, but we note that for most funds that are not currently clearing in-scope index credit default swaps the relevant obligation will apply from 9 February 2018. The RTS also specifies the minimum remaining maturity for those counterparty categories for the purposes of the frontloading requirement.

ESMA published a final report on draft RTS relating to indirect clearing arrangements for OTC derivatives and exchange-traded derivatives under EMIR and MiFIR on 26 May 2016. The Commission has three months to decide whether to endorse them.

On 2 June 2016, ESMA entered into a memorandum of understanding with the US Commodity Futures Trading Commission ("CFTC"). It sets out the co-operation arrangements between the authorities regarding US CCPs that are authorised or recognised by the CFTC and that have applied to ESMA for recognition to act as a clearing house under EMIR.

On 6 June 2016 ESMA published an updated version of its Q&A on the implementation of EMIR which includes new answers relating to the clearing obligation, specifically about the self-categorisation that is necessary to establish which counterparties belong to which categories. It also clarifies what counterparties should do where some of their counterparties have not provided the information on their category.

On 10 June 2016, the European Commission adopted a Delegated Regulation supplementing EMIR as regards RTS on the clearing obligation which provides that certain OTC interest rate swaps settling in specific European currencies must be cleared through CCPs. The Council of the EU and the European Parliament now have up to two months to consider the supplementary RTS.

On 30 June 2016 the European Supervisory Authorities (ESMA, the European Banking Authority and the European Insurance and Occupational Pensions Authority) sent a letter to the Commission urging them to adopt the draft RTS on risk mitigation techniques for non-centrally cleared OTC derivatives. The draft RTS set down rules around the exchange of collateral for non-cleared OTC derivatives, including a list of eligible collateral and rules on haircuts, and envisages a start date of 1 September 2016.

1.6 ICAV Voluntary Strike-Off Forms and Guidance

In MAY 2016 The Central Bank has published additional forms on the Central Bank website relating to the voluntary strike-off of a registered ICAV. This includes a draft wording of the advertisement which must be published in a daily national newspaper indicating the ICAV's intention to be struck-off the Register of Registered ICAVs.

1.7 Opinion on EU Framework for Loan Origination by Investment Funds

On 12 April 2016, ESMA published an opinion on the necessary elements for a common EU framework for loan origination by investment funds. This is to frame the European Commission upcoming consultation on establishing a common EU approach to loan origination by funds. It sets out ESMA's views on the authorisation of loan originating funds and their managers, eligible investors, organisational requirements and leverage.

1.8 Capital Requirements Regulation

The Capital Requirements Regulation (Regulation 575/2013) ("CRR") applies to credit institutions and investment firms and contains provisions relating to, among other things, own funds and capital requirements, large exposures, securitisations, liquidity, leverage and supervisory reporting.

The Implementing Regulation amending implementing technical standards ("ITS") on methodology and disclosure for G-SIIs or global systemically important institutions under CRR came into force on 26 May 2016. The Delegated Regulation on RTS on derogations for currencies with constraints on availability of liquid assets under the CRR came into force on 2 June 2016.

On 2 June 2016, the Commission Delegated Regulation 2016/709 containing RTS specifying the conditions for the application of the derogations concerning currencies with constraints on the availability of liquid assets under the CRR.

The European Central Bank ("EBA") published guidance on 6 June 2016 on the review of the qualification of capital instruments as additional tier 1 and tier 2 instruments under the Single Supervisory Mechanism Regulation (1024/2013) and the CRR.

On 11 June 2016, the Commission Implementing Regulation 2016/892 on the extension of the transitional periods related to own funds requirements for exposures to CCPs set out in CRR and EMIR came into force.

On 13 June 2016, the EBA published its final draft RTS on assigning risk weights to specialised lending exposures under Article 153(9) of the CRR.

On 29 June 2016, Regulation 2016/1014 amending the CRR to extend an exemption from certain requirements for commodity dealers was published in the Official Journal of the EU. The exemption of commodity dealers from large exposure requirements and from own funds requirements has been extended under the amending Regulation to apply until 31 December 2020 or until a revised framework for the application of CRD IV to investment firms comes into force, whichever is the earlier. It enters into force on 19 July 2016.

1.9 Securities Financing Transactions Regulation

The Securities Financing Transactions Regulation ("SFTR") covers all forms of lending, borrowing and re-use of securities in the EU and in all the branches of counterparties to securities financing transactions ("SFTs") no matter where they are located. It requires SFTs to be reported to trade repositories, places additional binding reporting requirements on investment managers and introduces prior risk disclosures and written consent before assets are rehypothecated. It applies from 12 January 2016 with the exception of certain provisions in Article 33.

On 13 April 2016, various trade bodies (AFME, FIA, ICMA, ISDA and ISLA) published an information statement that can be used by market participants to inform their counterparties of the risks involved if the counterparty consents to a right of use of collateral in a security collateral arrangement or concludes a title transfer collateral arrangement so that they can comply with Article 15 of the SFTR. Article 15 provides that a party's right to use certain financial instruments received as collateral is subject to the receiving counterparty notifying the providing counterparty in writing of the risks and consequences that may be involved in either agreeing to a right of use of collateral provided under a security collateral arrangement or concluding a title transfer collateral arrangement.

ESMA intends to a publish consultation paper on draft RTS and ITS in the third quarter of 2016.

1.10 MiFID II/MiFIR Update

The Markets in Financial Instruments Directive (2014/65/EU) ("MiFID II") and the Markets in Financial Instruments Regulation (Regulation 600/2014) ("MiFIR") repeal the Markets in Financial Instruments Directive (2004/39/EC) ("MiFID"). They were to be transposed into national law by 3 July 2016 but will now apply from 3 January 2018. (A new directive amending MiFID II Directive and the new regulation amending MiFIR, the Market Abuse Regulation and the CSD Regulation to, among other things, postpone the implementation date of the MiFID II legislative package by one year to 3 January 2018 has been adopted.)

On 7 April 2016, ESMA published a report (ESMA/2016/584) following its peer review on how national regulators assess compliance with the suitability requirements when firms provide investment advice to retail clients under MiFID (2004/39/EC). The requirements are designed to ensure that firms only recommend suitable investment products, based on the investor's profile.

During Q2 of 2016 the European Commission has adopted many delegated regulations supplementing MiFID II and MiFIR such as RTS on requirements to ensure fair and non-discriminatory co-location services and fee structures; RTS specifying the requirements on market making agreements and schemes; RTS on the direct, substantial and foreseeable effect of derivative contracts within the EU and the prevention of the evasion of rules and obligations under MiFIR; RTS on volume cap mechanism and provision of information for the purposes of transparency and other calculations under MiFIR; and RTS specifying information to be notified by investment firms, market operators and credit institutions and specifying the obligation to clear derivatives traded on regulated markets and timing of acceptance for clearing.

The next step will be for the Council of the EU and the European Parliament to consider the delegated regulations. If neither of them object, each delegated regulation will enter into force 20 days after it is published in the Official Journal of the EU.

1.11 PRIIPs KID Regulation

The Regulation on key information documents ("KIDs") for packaged retail and insurance-based investment products ("PRIIPs") ("PRIIPs KID Regulation") introduces a new pan-European pre-contractual product disclosure document for PRIIPS in EU Member States from 31 December 2016. The requirement to publish a PRIIPs KID will apply to UCITS fund managers by December 2019.

On 30 June 2016, the European Commission adopted a delegated regulation supplementing the PRIIPs KID Regulation with regard to RTS on the presentation, content, review and revision of KIDS and the conditions for fulfilling the requirement to provide such documents. The Council of the EU and the European Parliament need to consider it and if neither objects, it will enter into force 20 days after its publication in the Official Journal of the EU and will apply from 31 December 2016.

1.12 MMF Regulation

On 12 May 2016 the Presidency of the Council of the EU published its fifth compromise proposal relating to the proposed Regulation on Money Market Funds ("MMFs") which will create new rules to regulate how MMFs operate through a new framework of requirements to enhance their liquidity and stability. On 17 June 2016, the Council of the EU announced that the Permanent Representatives Committee ("COREPER") has agreed, on behalf of the Council, the Council's negotiating mandate on the MMF Regulation and that it will ask the Presidency to start talks with the European Parliament. Depending on the negotiations, this could lead to the finalisation of the text of the MMF Regulation before the end of the year.

1.13 European Venture Capital Funds and Social Entrepreneurship Funds

The European Venture Capital Funds Regulation (Regulation 345/2013) ("EuVECA regulation") sets out a marketing passport to allow fund managers to market qualifying venture capital funds to EU investors using the EuVECA designation. The European Social Entrepreneurship Funds Regulation (Regulation 346/2013) ("EuSEF regulation") sets out a marketing passport to allow fund managers to market qualifying social entrepreneurship funds to EU investors using the EuSEF designation.

On 31 May 2016, ESMA published an updated version of its Q&A on the application of both regulations. This includes a new question and answer on the use of the designations of EuSEF and EuVECA funds when marketed only in their home member state. It confirms that the conditions for the use of the designations "EuSEF" and "EuVECA" are linked to the compliance of their managers with qualitative requirements and not subject to any requirement to market the respective fund in more than one EU member state.

1.14 Final Report on Draft RTS under ELTIF Regulation

On 8 June 2016, ESMA published a final report on the draft RTS under the Regulation on European Long-Term Investment Funds 2015/760 ("ELTIF Regulation"). The European Commission has three months to endorse the draft RTS.

The key proposals include:

1. The criteria to determine the circumstances in which financial derivatives are used solely for hedging purposes, based on those in the 'CESR guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS on risk measurements';
2. The life of an ELTIF should be determined with reference to the individual asset within the ELTIF portfolio which has the longest investment horizon;
3. A non-exhaustive list of the types of market risk ELTIF managers should take into account when assessing the market for potential buyers ahead of the disposal of their asset;
4. The criteria for the valuation of the ELTIF assets ahead of their divestment which specify the timing of the valuation and allow for valuations made under the AIFM to be taken into account; and
5. A grandfathering provision, whereby ELTIFs have one year after the RTS come into force to comply with these rules.

ESMA is postponing the delivery of its ELTIF RTS on the cost disclosure information that must be included in the ELTIF's prospectus. This is to take into account the work being undertaken on cost disclosures for the PRIIPs Regulation 1286/2014 (which applies from 31 December 2016).

1.15 European Commission: Consultation on Cross-Borders Distribution of Investment Funds

On 2 June 2016, the European Commission published a consultation paper on the main barriers to cross-border distribution of investment funds. The types of funds relevant to the consultation are UCITS, AIFs, ELTIFs, EuVECAs and EuSEFs. The Commission's aim is to increase the proportion of funds marketed and sold across the EU. The consultation is part of the Commission's September 2015 action plan for a capital markets union ("CMU"). The consultation closes on 2 October 2016.

1.16 Market Abuse Regulation

The Market Abuse Regulation (Regulation 596/2014) ("MAR") will apply from 3 July 2016 and the Directive on criminal sanctions for insider dealing and market manipulation (2014/57/EU) ("CSMAD") was transposed into Irish law (by the European Union (Market Abuse) Regulations 2016) (together, MAD II). MAR updates and strengthens the existing framework by extending its scope to new markets and trading strategies and by introducing new requirements. The Central Bank has issued revised Market Abuse Rules and Guidance on "Market Abuse Regulatory Framework" to align with MAR and the implementation of the new regime.

On 1 April 2016, ESMA published an updated version of its Q&A on the common operation of the Market Abuse Directive (2003/6/EC) ("MAD") which includes a new question on the definition of recommendation in the Investment Recommendations Directive2003/125/EC. On 30 May 2016, it published a further Q&A update which clarifies the scope of firms subject to the MAR provision to detect and report suspicious orders and transactions; specifically, whether it applies to UCITS management companies, AIFMs or firms professionally engaged in trading on own account.

1.17 Benchmark Regulations

On 29 June 2016 the Benchmark Regulation 2016/1011 was published in the Official Journal of the EU and entered into force on 30 June 2016. It applies from 1 January 2018, with the exception of certain provisions (specified in Article 59) that apply from 30 June 2016 and one provision that applies from 3 July 2016.

On 27 May 2016 ESMA published a consultation paper on its technical implementation which covers the five areas on which the European Commission has requested advice:

• Some elements of the definitions.
• Measuring the use of critical and significant benchmarks.
• Criteria for identifying critical benchmarks.
• Endorsement of a benchmark or family of benchmarks provided in a third country.
• Transitional provisions.

The deadline for comments was 30 June 2016. ESMA intends to publish a second consultation paper on draft technical standards in the second half of 2016.

1.18 Statutory Audit Directive and Investment Funds

The European Union (Statutory Audits) (Directive 2006/43/EC, as Amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016 give effect to Directive 2014/56/EU on statutory audits of annual accounts and consolidated accounts; and (ii) certain provisions of Regulation (EU) No 537/2014 on specific requirements regarding statutory audit of public-interest entities from 17 June 2016. It targets "public interest entities" and may have implications for EU domiciled investment funds listed on a regulated market such as the Irish Stock Exchange. It includes a requirement for the rotation of auditors every ten years and limits audit firms providing non-audit services to the listed clients.

1.19 Regulatory Reporting Requirements of Irish Authorised Investment Funds

The Central Bank published an updated guidance note in April 2016 to provide information and direction to funds' board of directors/management company/AIF management company/general partner, as appropriate, on the reporting requirements relating to the extension of their Online Reporting System to investment funds.

1.20 AIMA Updates Guide to Cyber Security

AIMA published the first of its periodic updates to its Guide to Sound Practices for Cyber Security in April 2016. The update includes a more detailed breakdown of the common types of attacks, including indications of their risk/probability of happening, their probability of discovery, the average timeline of that type of attack and the mode of operation of such attacks, as well as the relevant threat prevention methods and threat detection methods.

1.21 EU Capital Markets Union

On 30 September 2015 the European Commission launched its capital markets union ("CMU") action plan to build a single market for capital. On 25 April 2016, it published its first status report on its progress which sets out actions adopted since September 2015. It also describes the key initiatives scheduled for 2016 and reports on the preparation of other CMU measures that will be delivered in 2017-18. The Commission plans to update the status report every six months.

1.22 Investor Money Regulations and Umbrella Cash Accounts

The Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) Investor Money Regulations 2015 ("IMR") come into force on 1 July 2016. The Central Bank updated their guideline on IMR Reporting Obligations for Funds Service Providers in June 2016. IMR strengthens the safeguards around investor money held by fund service providers ("FSPs") and covers the operation of "collection accounts", being accounts operated by FSPs to hold money to deliver from an investor to an investment fund or from an investment fund to an investor. By 1 July 2016, investment funds and their service providers operating collection accounts have to either (a) implement enhanced measures in order to comply with the requirements of IMR; or (b) structure/restructure collection account arrangements to fall outside the scope of IMR.

1.23 Investment Funds Statistics: Q1 2016

The main points to note in the Central Bank's June 2016 update for Q1 2016 are:

1. The net asset value of investment funds resident in Ireland ("IFs") decreased by 2.5% over the first quarter of 2016, to €1,397 billion from €1,432 billion in Q4 2015, with negative revaluations of €46 billion accounting for most of this fall.
2. Over the quarter, IFs total assets experienced negative revaluations of 2% with equity funds recording the most pronounced fall of 5%.
3. Equity markets suffered a reversal from the recovery of the prior quarter. This particularly impacted equity funds which suffered a €26 billion negative revaluation during the quarter.
4. Holdings of government debt stood at €318 billion in Q1 2016, following €17 billion in transaction inflows. There were continued strong inflows (€13 billion) into higher yielding UK government debt, relative to similarly rated other European sovereign debt.

1.24 Anti-Money Laundering Update

On 25 June 2015, the Fourth Money Laundering Directive ((EU) 2015/849) ("MLD4") and the revised Wire Transfer Regulation ((EU) 2015/847) ("WTR") came into force. The WTR applies from 26 June 2017. EU Member States are to bring into force measures transposing MLD4 into national law by 26 June 2017. On 7 April 2016, the European Commission published a roadmap relating to its proposal for a Directive to amend MLD4. The legislative proposal, which the Commission intended to publish by the second quarter of 2016, will improve MLD4 by:

• Clarifying enhanced due diligence measures and countermeasures relating to high-risk third countries.
• Regulating virtual currency exchange platforms.
• Addressing concerns surrounding anonymity of prepaid instruments.
• Introducing obligation on EU member States to establish centralised bank and payment account registers or data retrieval systems.
• Improving financial intelligence co-operation among financial intelligence units or FIUs.

2 TAX

2.1 EU Anti-Tax Avoidance Directive

Council Directive (EU) 2016/1164 laying down rules against tax avoidance practices (the "ATA Directive") will enter into force on 9 August 2016. The ATA Directive constitutes part of the European Commission's anti-tax avoidance package and sets out minimum standards which all EU Member States would be required to implement. The ATA Directive will apply to all taxpayers that are subject to corporate tax in any Member State, including corporate taxpayers resident outside the EU with a permanent establishment in the EU. It will be transposed into national law in each Member State by 1 January 2019, with later dates for certain measures.

The ATA Directive's introduction of a limitation on deductibility of interest of 30% of EBITDA is particularly noteworthy. This applies to both internal and external debt. The cap applies to borrowing costs which exceed the interest income (and equivalent revenue) of the taxpayer (so called "exceeding borrowing costs").

The definition of "borrowing costs" is broad, and includes interest expenses and other equivalent costs that a taxpayer incurs in connection with the borrowing of funds. It also includes discounts, the interest element in a finance lease and expenses incurred in connection with the raising of finance. It is expected that the definition of interest income will be similarly broad.

Member States may allow derogations and exclusions from the rules, including a derogation where exceeding borrowing costs are less than EUR3m, and where the entity is viewed as a "standalone entity". There are potential exclusions for loans concluded before 17 June 2016 and for infrastructure projects. There are also derogations for group members based on the debt/equity ratio of the group. Finally, Member States may exclude from the general limitation certain financial institutions including, banks, insurers, alternative investment funds and UCITS.

Irish regulated funds should be unaffected by the restrictions on the basis that they constitute AIFs.

The effect of the interest deductibility rule on Irish companies which are "qualifying companies" under section 110 of the Irish Taxes Consolidation Act 1997 in each specific case will need to be considered.

In his statement welcoming the agreement on the ATA Directive, Irish Finance Minister Noonan stated that the provisions on interest deductibility are deferred until 2024 for countries, like Ireland, that already have strong targeted rules.

The ATA Directive also includes provisions on exit taxation, a general anti-abuse rule, controlled foreign companies and hybrid mismatches.

2.2 New VAT Guidance

Ireland offers an attractive VAT regime for Irish investment vehicles such as regulated funds, capital markets issuers and financing vehicles. The 2013 decision Court of Justice of the European Union ("ECJ") in the Gesellschaft für Börsenkommunikation ("GfBk") case provided important guidance on the scope of the VAT exemption for management services to special investment vehicles. Irish Revenue has just issued revised guidance in respect of this case. For many funds and managers, the guidance will merely confirm the treatment which they have adopted historically and it reflects the advice Maples was providing in 2013. For more information see our client update, Important EU Decision on VAT and Investment Advice.

The main points are as follows:

1. Investment advice relating to a specified investment vehicle (such as an Irish regulated fund) can qualify as a VAT exempt service.
2. The advice must be intrinsically connected to the investment activities of the vehicle and not merely support or technical services.
3. If funds have been incorrectly charged VAT, they should contact their service provider, and this may cause some funds to review the terms of their contracts to determine whether they are entitled to reimbursement.

The VAT treatment of investment funds continues to be the subject of ongoing European litigation, with cases such as Fiscale EenheidX (C-595/13) in December 2015. For more information see our client update, International and Irish Tax Update - March 2016. It is understood that the Revenue Commissioners consider that this case should have no impact on Irish VAT legislation.

3 LISTINGS

3.1 Irish Stock Exchange ISIN Codes

The Irish Stock Exchange ("ISE") commenced a new process for applying International Security Identification Numbers ("ISINs") to Irish domiciled debt securities and investment funds intending to list on the ISE's markets from 27 June 2016.

From this date listing sponsors are required to apply separately for ISIN codes for each share class applying to list prior to making an application to list on the ISE. ISIN codes will be issued within 24 hours of application and there is a fee for each ISIN code issued.

3.2 Update to the ISE Rulebook

MAD II will come into effect on 3 July 2016. The ISE have updated their investment funds rulebook and Chapter 14 of the Listing Rules to reference these changes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.