The Front Page, Asset Management & Investment Funds: EU & International Developments

Responses to ESMA call for evidence on asset segregation and custody services under AIFMD and UCITS V
On 27 September 2016, ESMA published the responses it received in respect of its call for evidence on asset segregation and custody services under the AIFMD and the UCITS Directive. Irish Funds responded to this call for evidence which closed on 23 September. This call for evidence followed ESMA’s previous consultation on ‘Guidelines on Asset Segregation under the AIFMD’. The majority of respondents to ESMA’s initial consultation, including Irish Funds, strongly objected to ESMA’s proposed approach. In response ESMA issued a further consultation seeking more detail and incorporating UCITS into the consultation post UCITS V. Irish Funds provided feedback in relation to a number of areas, including:

  • a detailed description of prevalent asset segregation models;
  • an explanation of the operation of omnibus accounts and the safeguards and oversight practices in relation to these accounts;
  • an explanation of how assets of the UCITS/AIF are protected against insolvency of parties in the custody chain and considerations in relation to the speed of return of assets in the event of an insolvency;
  • a description of how books and records and effective reconciliation ensures investor protection; and
  • consideration of the treatment of central securities depositaries (CSDs) in respect of services that they provide.

European Commission overview of level 2 financial services measures
On 22 September 2016, the European Commission published an overview of its level 2 measures in the area of financial services.

The initiatives listed (in table format) include level 2 measures in preparation or adopted relating to various pieces of level 1 legislation which include: CRD IV Directive and the Capital Requirements Regulation, the Bank Recovery and Resolution Directive, MiFID II Directive and MiFIR, the Market Abuse Regulation, EMIR, the AIFMD and the CRA III Regulation.

The draft Securitisation Regulation which issued in September 2015 is not listed. The Securitisation Regulation will repeal Article 50a of the UCITS Directive and Article 17 of the AIFMD, both of which concern investment in securitisation positions. In due course UCITS and AIFMs will be obliged to comply with the draft Securitisation Regulation which is discussed in our question of the month.

G20/FSB financial reforms in non-priority areas
The Financial Stability Board (FSB) published a summary of the key findings from an FSB implementation monitoring network survey relating to the status of implementation of G20/FSB reforms in non-priority areas. The non-priority areas include securitisation, enhancing supervision, improving oversight of credit rating agencies, enhancing risk management, strengthening deposit insurance, safeguarding the integrity and efficiency of financial markets and enhancing financial consumer protection. 

PRIIPs
The General Secretariat of the Council of the EU published an "I/A" item note addressed to its Permanent Representatives Committee (COREPER) referring to the rejection by the European Parliament of the European Commission's proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (the PRIIPs KID Regulation) in respect of regulatory technical standards (RTS) on the presentation, content, review and revision of KIDs. The note states that, following the Parliament's objection, the proposed Delegated Regulation can no longer enter into force and there is no need at this stage for the Council to express its position on the matter. Various member states have called for a delay of 12 months to the application of the PRIIPs Regulation.

European Commission Q&As on financial services legislation
The European Commission has updated its webpage on Q&As on banking and finance legislation to re-instate Q&As related to certain key financial services legislation that it had previously deleted. The Q&As relate to the Markets in Financial Instruments Directive  (MiFID), the Capital Requirements Directive (CRD), the Payment Services Directive (PSD), the second Electronic Money Directive  (2EMD) and the AIFMD.

Anti- Money Laundering/ Combating the Financing of Terror
On 20 September 2016, European Commission Delegated Regulation supplementing the Fourth Money Laundering Directive by identifying high-risk third countries with strategic anti-money laundering (AML) and counter-terrorist financing (CTF) deficiencies was published in the Official Journal of the EU.

The Counter-Terrorism Financing Summit 2016 brought together leaders and experts in counter terrorism financing and financial intelligence from around the world to begin the process of developing regional solutions to terrorism financing issues and risks. Australia’s financial intelligence agency (AUSTRAC) and its Indonesian counterpart financial intelligence unit, Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), issued the Regional Risk Assessment on Terrorism Financing 2016. The regional risk assessment identifies primary terrorism financing risks from across a broad spectrum of assessed risks. One of the key requirements of the FATF Recommendations is for countries, to identify, assess and understand the money laundering and terrorist financing risks to which they are exposed. Once these risks are properly understood, countries will be able to implement measures that mitigate these risks.

The International Monetary Fund conducted a detailed assessment of Canada’s AML/CFT framework, and the resulting report was adopted by the FATF as Canada’s 4th mutual evaluation report. In summary, Canada was found to have a strong anti-money laundering and combating the financing of terrorism regime which achieves good results in some areas but requires further improvements to be fully effective.

Regulation amending EuVECA Regulation and EuSEF Regulation
On 26 September 2016, the Presidency of the Council of the EU published its first compromise proposal for the proposed Regulation amending the European Venture Capital Funds Regulation (EuVECA Regulation) and the European Social Entrepreneurship Funds Regulation (EuSEF Regulation).

Central Bank of Ireland
Details of the number of new platforms and new funds (including sub-funds) which were authorised by the Central Bank in August 2016 are not yet available.

For more information please contact Nollaig Greene or a member of the Asset Management & Investment Funds Team.

Date published: 30 September 2016