September/October 2014 - European fund industry news

Fund industry updates and news

IOSCO consults on custody principles

The International Organization of Securities Commissions (IOSCO) is consulting on the development of a set of principles for the custody of 'collective investment schemes'.

IOSCO wishes to gather the views of investment managers, custodians, institutional investors and other interested parties on this topic. This will be the first time that IOSCO has visited this subject since a 1996 paper.

The consultation report published on 10 October proposes nine principles aimed at identifying the core issues that should be kept under review by the regulatory framework.

Responses to the consultation should be submitted by 10 December 2014.

UCITS V entry into force and ESMA consultation

On 28 August, the text of UCITS V directive was published in the official journal of the European Union and came into force on 17 September.

Member states have until March 2016 to transpose the directive into national law.

The UCITS V directive covers depositary functions, remuneration policies and sanctions and on 26 September, the European Securities and Markets Authority (ESMA) issued a consultation paper on implementing measures of the directive concerning the depositary role of UCITS funds.

In particular, ESMA is seeking input on two of its proposals:

• Independence requirements for depositaries
• Insolvency protection when delegating safekeeping.

The consultation closes on 24 October 2014.

ESMA consults on social entrepreneurship and venture capital funds

Also on 26 September, ESMA issued a consultation paper on implementing measures related to the European social entrepreneurship and European venture capital funds.

The consultation covers:

• Definitions of goods, services or methods of production embodying a social objective
• Conflicts of interest of asset managers
• Social impact measurement
• Information to investors in social entrepreneurship funds.

The closing date for this consultation is 10 December 2014.

Prior to this, ESMA will hold a public hearing on European social entrepreneurship funds on 10 November in Paris.

European associations call for more protection of ISIN users

On 29 September, various European fund and market data associations, acting through EFAMA, the European Fund and Asset Management Association, called upon the EU Antitrust Commission to step up its protection of European users of International Securities Identification Numbers, or ISINs.

The group asserts that Standard and Poors has fallen short of meeting EU obligations, dating from 2011, concerning the costs of using US ISINs, in spite of a recent announcement by the company to waive the annual fees on its “US ISIN Basic Service”.

In essence, the group believes that all ISINs are a common good and the use of them by market actors should be free of charge, after initial creation and registration, and free of future contractual commitments for users.

ESMA updates guidelines and Q&A

During August and September, ESMA updated two documents of significance for the fund industry:

• Its guidelines on ETFs and other UCITS issues
• Its Q&A on the application of the AIFMD

The latter contained answers to new questions on reporting to national authorities and delegation.

ALFI issues AIFMD guidelines and Q&A

On 3 October, ALFI, the Luxembourg fund association, released the first editions of two documents prepared by its AIFMD reporting working group:

• A technical Q&A on AIFMD reporting, complementing ESMA’s Q&A
• A guidance document concerning reporting to investors and annual reports under the AIFMD

The majority of alternative investment fund managers will be reporting for the first time on 31 October.

Ireland introduces loan origination funds

In September, the Central Bank of Ireland finalised the framework for Ireland’s loan origination funds, a structure that was developed as a result of increased demand for an alternative to bank finance.

This will be the first dedicated regulatory regime in the EU for loan funds and will operate under the alternative investment fund managers directive. The funds will be open to qualifying investors including pension funds, insurers, banks and high net worth individuals.

Since 1 October, the central bank has been accepting applications for these funds.

Ireland as a fund centre was busy during the last two months. The central bank published a consultation on corporate governance for fund managers, including a plan to no longer require Irish resident directors, and at the end of July the bill on the ICAV, or Irish Collective Asset-management Vehicle, also a new type of fund structure, was published.

LuxFLAG awards its first ESG labels

On 30 September, LuxFLAG the labelling agency for responsible investment funds awarded its first labels for ESG (environmental, social and governance) to three funds.

The ESG label was launched in May and is Europe’s first for funds that meet specific criteria related to their respect of environment, social and governance objectives.

Fund industry publications

Notable publications in August and September included:

• ALFI released a comprehensive study that was carried out by Fundscape on the potential impact of an RDR regime on the European fund industry. This study also looked at the post-RDR landscape in the UK and there is a video summary of the key findings
• In an interesting move, three fund associations (the IMA from the UK, Germany's BVI and the AFG of France) issued a common data exchange template for Solvency II
• AIMA updated its industry standard due diligence questionnaire for hedge fund managers
• ABBL, the Luxembourg bankers association, released the results of a survey on the cost of regulation and its impact on Luxembourg
• The IMA published its twelfth annual asset management survey
• The 2014 edition of the EY Luxembourg technical guide to Luxembourg funds was published
• KPMG Luxembourg produced an investor-centric infographic on the planned MiFID II ban on inducements
• EY Luxembourg released an updated version of its wall chart on fund distribution flows

_{Published on: 23 October 2014}

Fundsquare News 13 - September/October 2014