Ireland: Capital Markets Union

Last Updated: 15 October 2015
Article by Andrew Bates and Jeff Mackey

Most Read Contributor in Ireland, July 2017

The Investment Funds Perspective

In our May 2015 publication entitled "EU Capital Markets Union" (which can be accessed here), we outlined that the EU Commission had issued a consultation paper entitled "Building a Capital Markets Union". That consultation paper raised some broad proposals to a single market for capital within the EU. Following the end of the consultation process and its review of over 700 responses, the EU Commission on 30 September 2015 released a further paper entitled "Action Plan on Building a Capital Markets Union" (the "Action Plan"). The Action Plan can be accessed here.

Priority Actions

The Action Plan identifies the following priority actions that will be put in place to develop a Capital Markets Union by 2019:

  • providing more funding choices for Europe's businesses and SMEs;
  • ensuring an appropriate regulatory environment for long term and sustainable investment and financing of Europe's infrastructure;
  • increasing investment and choices for retail and institutional investors;
  • enhancing the capacity of banks to lend; and
  • bringing down cross-border barriers and developing capital markets for all EU Member States.

Overview of Investment Fund Related Matters

The Action Plan, and the Capital Markets Union in general, will impact on the investment funds sector in numerous ways and, over the coming months, Dillon Eustace will provide you with some further detailed analysis of various proposals and the potential impact of these proposals as they relate to the investment funds sector.

However, some of the key matters to be aware of at this early stage include:

  • Venture Capital Funds: The EU Commission has recognised that venture capital has a key part to play in providing finance to start-ups and rapidly expanding businesses. The EU has already established an EU venture capital sector through the Regulation on European Venture Capital Funds (EuVECA) and the Regulation on European Social Entrepreneurship Fund (EuSEF). However, the EU Commission has identified limitations in respect of the EuVECA and EuSEF and will be seeking to address these limitations in addition to proposing a range of pan-European venture capital fund-of-funds and multi-country funds. As part of this package to support venture capital the EU Commission will also be reviewing best practices on tax incentives. The EU Commission has released a public consultation on venture capital which will run until 6 January, 2016. The consultation paper can be accessed here. A package of proposals relating to venture capital funds will then be released between Q2 2016 and 2017.
  • Loan-Originating Funds: It has been possible to create regulated loan-originating funds (structured as qualifying investor alternative investment funds) in Ireland since October 2014. However, there has been very limited uptake in the creation of such funds primarily due to some of the regulatory requirements imposed by the Central Bank. The Action Plan identifies that some Member States have introduced bespoke regimes into their national frameworks to frame the conditions under which alternative investment funds can originate loans. The Action Plan also notes that EuVECA and European Long Term Investment Funds (ELTIF) can originate loans to a limited extent. The EU Commission will be working to assess the need for a coordinated approach to loan origination by funds and the case for a future EU framework. A proposal is expected in Q4 2016.
  • Common Rules on Securitisation: The EU Commission has issued a proposal (which can be accessed here) for a regulation to develop a simple, transparent and standardised securitisation market. The proposed regulation seeks to support investor confidence and make it easier to carry out due diligence. In order to create a harmonised approach to investment in securitisation positions, the proposed regulation will repeal appropriate provisions of AIFMD, the UCITS Directive and EMIR with the provisions of the proposed regulation applicable instead. We would note that the proposed amendment to the UCITS Directive within the current proposed regulation may need to be revised by the EU Commission.
  • Covered Bonds: A public consultation document has been issued in respect the creation of a pan-European framework for covered bonds. As part of this consultation the EU Commission is exploring (and seeking feedback) on various measures including repealing the current definition of "covered bond" as set out in the UCITS Directive and instead using an uniform definition. The consultation paper can be accessed here and is open until 6 January, 2016.
  • Prospectus Directive: The EU Commission will be looking to modernise the Prospectus Directive (which is typically only applicable for closed-ended funds). The Action Plan recognises the cost in the production of a prospectus for entities wishing to seek access funding through the public offer of debt or equity instruments. It also recognises that prospectuses can be complex and excessively detailed for investors. Accordingly, it is proposed to update when a prospectus is actually needed and to streamline the information required and the approval process. The proposal to modernise the Prospectus Directive is expected in Q4 2015.
  • Solvency II: As outlined above, the creation of an appropriate regulatory environment for long term and sustainable investment and financing of Europe's infrastructure is one of the priority areas identified within the Action Plan. The EU Commission is exploring modifications to the Solvency II Delegated Regulation to create incentives and make it easier for insurers to invest in infrastructure projects. This could be done by way of an investment in a European Long Term Investment Fund (ELTIF) which itself invests in infrastructure. An ELTIF is a new cross-border fund vehicle (effective from December 2015) for long term projects and will provide asset managers (primarily alternative investment funds managers or "AIFMs") with the opportunity to provide investors with access to a wide range of assets including infrastructure which may not be available under current investment fund structures. The proposed amendments to the Solvency II Delegated Regulation can be assessed here.
  • Review of the Regulatory Framework: We are all aware of the raft of regulatory reforms introduced since the recent financial crisis. The Action Paper notes it is important that EU legislation strikes the right balance between reducing risk and enabling growth and that it does not create barriers that were not intended. On this basis the EU Commission has launched a call for evidence (which can be assessed here) to review the cumulative impact and coherence of the financial legislation adopted in response to the financial crisis. The consultation paper is open until 6 January, 2016.
  • Removal of Barriers to Cross-Border Distribution of Investment Funds: The Action Plan notes that market fragmentation is a prevalent issue in the European asset management sector. Factors such as discriminatory tax treatment, varying national requirements on the marketing of investment funds and fees for cross-border notifications have been identified as barriers to efficient cross-border distribution. The Action Plan outlines the EU Commission intends to gather evidence on the main barriers and then seek to eliminate those barriers, through legislation if necessary. A consultation is expected in Q2 2016.
  • Facilitating Cross-Border Investment: There are a range of proposals within the Action Plan to address obstacles identified in cross-border investment. The EU Commission will seek to address uncertainly around securities ownership (for example where the security issuer and investor are located in different Member States) in 2017. A review of cross-border clearing and settlement will also be undertaken in 2017. The EU Commission will also be seeking to resolve national barriers to cross-border investment including national "gold-plating" of EU minimum rules or the divergent application of EU rules. A report is expected on this in Q4 2016. The EU Commission will also be reviewing issues related to insolvency (Q4 2016) and cross-border application of local withholding taxes (2017).

As you will see from the above, there are potential opportunities both for asset managers and investors from the range of proposals within the Action Plan.

Next Steps

Whilst the Action Plan is extremely broad in nature only a certain amount of information and detail has been released by the EU Commission so far. The Action Plan outlines a staggered release of information and consultation papers through to 2018. The matters of more immediate relevance are the consultation papers in respect of the Review of the Regulatory Framework, Venture Capital Funds and Covered Bonds which each close on 6 January, 2016.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.