Areas covered in this issue:
1. Undertakings in Collective Investments and Transferable
2. Alternative Investment Fund Management Directive ("AIFMD")
3. Packaged Retail Insurance-based Investment Products ("PRIIPs")
4. European Markets Infrastructure Regulation ("EMIR")
5. Securitisation Regulation.
6. Benchmarks Regulation.
7. European Securities and Markets Authority ("ESMA")
8. International Organisation of Securities Commissions ("IOSCO")
9. Market Abuse Regulation ("MAR")
10. Prospectus Regulation
11. Central Bank of Ireland
12. Anti-money laundering ("AML") / Counter-Terrorist Financing ("CTF")
13. Data Protection / General Data Protection Regulation ("GDPR") / Cyber Security
15. Sustainable Finance.
16. Investment Limited Partnerships (Amendment) Bill 2019
If you have any questions in relation to the content please do not hesitate to contact your usual contact in Dillon Eustace.
1 UNDERTAKINGS IN COLLECTIVE INVESTMENTS AND TRANSFERABLE SECURITIES ("UCITS")
1.1 EFAMA publishes response to ESMA consultation on performance fees in UCITS
On 31 October 2019, the European Fund and Asset Management Association ("EFAMA") published a response to the public consultation on draft guidelines on performance fees in UCITS published by the European Securities and Markets Authority ("ESMA") in July 2019. In the response paper, EFAMA makes the following points of note:
- Minimum Crystallisation Period: EFAMA agrees with the proposed minimum for a crystallisation period of no less than one year, but recognises that shorter crystallisation periods should be conceivable in relation to "pure" high water mark models as well as under a series of limited exceptional circumstances;
- Performance Fee Models: in line with IOSCO's 2016 Brest Practices, EFAMA believes that various performance fee models would all prove compatible with the key principles of ESMA's draft guidelines;
- Disclosure of Performance Fee in UCITS key investor information document ("KIID"): a reference to a benchmark for the mere purpose of calculating performance fees against it should not be construed as an indication that that benchmark defines the UCITS' ultimate investment objective; and
- Alternative Investment Fund ("AIF") Products: It would be premature to extend the final guidelines to include retail AIF products in the absence of a comparable product regulation under Directive 2011/61/EU (the "AIFM Directive") and where retail AIF distribution is currently only possible in selected EU jurisdictions.
The EFAMA response can be accessed here.
1.2 IFIA publishes response to ESMA consultation on performance fees in UCITS
On 5 November 2019, the Irish Funds Industry Association ("IFIA") published a response to the public consultation on draft guidelines on performance fees in UCITS published by ESMA in July 2019. In the response paper, the IFIA makes the following points of note:
- Performance Fee Models: the final guidelines need to be sufficiently flexible to allow management companies to be able to tailor their performance fee model in line with a fund's investment objectives, strategy and policy;
- Unhedged Share Classes: the final guidelines should incorporate provisions regarding the calculation and disclosure of performance fees based on a high water mark model for an unhedged share class denominated in a currency other than the base currency of the UCITS;
- Prospectus Disclosure: the inclusion of specific examples of how the performance fee will be calculated in the Prospectus of a fund could be misleading. Management companies may be at risk of misleading investors if certain outcome permutations are not included;
- Verification by Depositary: the requirement by depositaries to verify all performance fee calculations on crystallisation and before payment is good practice and is in the interests of investors. This should be included in the final guidelines;
- Regulatory alignment: Various national competent authorities have already implemented new performance fee regimes. It is important that ESMA implements any new requirements in a manner that ensures regulatory alignment.
The IFIA response can be accessed 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.