Worldwide: Funds Bulletin - November 2015

Last Updated: 1 March 2016
Article by Hogan Lovells


1.1 Custody of CIS assets: IOSCO report on standards

The International Organisation of Securities Commissions (IOSCO) has published its final report on standards for the custody of collective investment scheme (CIS) assets.

The report aims to clarify, modernise and further develop international guidance for the custody of CIS assets, consistent with IOSCO's core objectives and principles of securities regulation.

The report sets out standards aimed at identifying the core issues that should be kept under review by the regulatory framework to ensure investors' assets are effectively protected. It reaffirms the importance for the regulatory framework to provide for suitable custodial arrangements to be in place, clear segregation requirements and appropriate independence. The standards also relate to the appointment and on-going monitoring of custodians.

The report also identifies some of the key risks associated with the custody of CIS assets, such as operational risk, misuse of CIS assets, risk of fraud or theft, and information technology risk.

1.2 Responses to ESMA's UCITS remuneration guidelines

AIMA has responded to the European Securities and Markets Authority (ESMA) consultation paper on guidelines on sound remuneration policies under UCITS V and the Alternative Investment Fund Managers Directive (AIFMD). AIMA supports ESMA's approach to the application of the proportionality principle and encourages ESMA to retain the possibility for firms to dis-apply certain remuneration principles, where it is proportionate for them to do so.

INREV has also responded to ESMA's consultation recommending adoption of the AIFMD Guidelines, including the proportionality principle.

1.3 MiFID II – Delayed implementation until January 2018

The European Commission has stated that implementation of MiFID II is likely to be delayed until January 2018. ESMA's Steven Maijoor has said that the timing for the implementation of MiFID II would be "extremely tight" and delays to the finalisation of regulatory technical standards mean that some of the IT systems that are required for the implementation of MiFID II will not be ready by January 2017. He acknowledged that ESMA itself faces significant challenges in building a "substantial" IT system to compile a list of all financial instruments traded in the EU.

According to Maijoor, ESMA has raised with the Commission the possibility of delaying certain parts of MiFID II, mainly related to transparency, transaction reporting and position reporting. A spokesman for the Commission has separately confirmed that its preliminary view is that a delay in the implementation of MiFID II may be necessary.

Michael Thomas, partner in our financial institutions group, said:

"Up until now the European institutions have been consistent in stating that the January 2017 deadline for MiFID II implementation would be met. However, the industry has been increasingly vociferous in calling for a delay, especially over the last couple of months. ESMA has now bitten the bullet, by recognising that it's not just investment firms, but also the regulatory authorities, who will struggle to get their systems ready in time for January."

See further our MiFID II microsite: .

1.4 Shadow Banking: ECB Report on financial structures and FSB report

In a recent consultation paper on limiting banks' exposure to shadow banking, the European Banking Association (EBA) defined "shadow bank" as including alternative investment funds (AIFs) and money market funds (MMFs). No UCITS, other than MMFs, would be covered by this definition. Various organisations, such as the Association of Real Estate Funds (AREF) and InvestEurope (formerly EVCA) have objected to the fact that AIFs form part of this definition (see July Funds Bulletin). Classifying AIFs as shadow banks would mean that they will also be subject to potentially conflicting banking regulation; there is evidence of policy differences between ESMA (the securities regulator) and EBA/ the European Central Bank (ECB) and the Financial Stability Board (FSB).

More recent shadow banking developments are ECB's Report on financial structures, including investment funds. Points to note:

  • The shadow banking sector growth over the past year has been driven primarily by non-MMF investment funds (i.e. AIFs), which expanded owing to net inflows and rising valuations. The weakening of the euro vis-à-vis other currencies contributed to this, as the share of assets invested outside the euro area amounts to 40%.
  • Euro area MMFs expanded as well, following a protracted period of decline, with net flows into these funds having stabilised since mid-2014.

1.5 HFSB issues revised Hedge Fund Standards

The Hedge Fund Standards Board (HFSB) has issued a revised version of its Hedge Fund Standards, following a public consultation launched in March 2015 on managing conflicts of interest.

The HFSB has also made available a tracked changes version of the Standards, for comparison purposes.

The amendments that have been made to the Standards are designed to strengthen internal compliance procedures and improve disclosure of conflicts of interest, specifically in the areas of parallel funds, including employee funds and the aggregate size of employee and partner co-investment in those funds.

The revised Standards will come into force on 2 May 2016 to allow HFSB signatories sufficient time to achieve conformity with them.

1.6 PRIIPs Regulation: Joint Committee of the ESAs consults on key information documents

The Joint Committee of the European Supervisory Authorities (ESAs) (ie EBA, ESMA and the European Insurance and Occupational Pensions Authority) have published a consultation paper on draft regulatory technical standards (RTS) which the Joint Committee is mandated to develop under Article 8 (5) of the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (PRIIPs Regulation).

The European Commission has also published a report (plus executive summary) on the consumer testing study that it has carried out relating to the possible new format and content for the PRIIPs KID.

Comments are requested by 29 January 2016. The Joint Committee will hold a public hearing on the consultation in Frankfurt on 9 December 2015. The RTS and accompanying impact assessment will be submitted for endorsement by the European Commission by 31 March 2016. Feedback on the consultation will also be published at this time.

1.7 Commission Work Programme – 2016 and Call for evidence on the EU regulatory framework for financial services

The Commission has launched its 2016 Work Programme which sets out the measures it intends to pursue in the coming year. There is a great deal of focus on geopolitical issues such as migration, the EU's role on the global stage, and terrorism. The financial services priorities listed are predominantly presented in the context of driving growth and achieving the Capital Markets Union (CMU).

Key areas of interest are:

  • The review of the Prospectus Directive
  • Reviews of the functioning of the European Venture Capital Fund (EuVECA) and European Social Entrepreneurship Fund (EuSEF) Regulations
  • Completion of Banking Union with legislative proposals with legislative proposals outlining steps towards a European Bank Deposit Insurance Scheme based on a reinsurance mechanism
  • A legislative initiative framing a new approach to business failure and insolvency
  • A new corporate tax legislative package including measures to enhance transparency and fight tax avoidance, including implementing international standards on BEPS, and a staged approach starting with a mandatory tax base together with the withdrawal of the existing CCCTB proposal

As part of its CMU project, the European Commission has launched a Call for Evidence on the EU regulatory framework for financial services. This provides an opportunity to highlight current rules that are disproportionate relative to the benefits that they deliver. The Commission will consider changing rules where industry highlights specific concerns.

To continue reading this bulletin, please click here.

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

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

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
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 you may opt out by clicking here

    Terms & Conditions and Privacy Statement (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

    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’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.


    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.


    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.

    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 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.


    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.


    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.


    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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

    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

    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

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

    By clicking Register you state you have read and agree to our Terms and Conditions