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Asset Management and Investment Funds Legal and Regulatory Update
European Commission Work Programme 2012 - Funds-related Developments
The European Commission has published a pre-final Work Programme for 2012. The funds-related developments which the work programme addresses are:
- UCITS V: Amendment of the UCITS IV Directive as regards rules on UCITS depositary functions, on manager remuneration policy, and on administrative sanctions. The Commission has indicated that the proposed legislation will be published in the Q2 2012.
- Shadow Banking: A communication will be adopted in the second half of the year to complement and implement the G20 work stream. This follows the Financial Stability Board's (FSB) Report on Shadow Banking: Strengthening Oversight and Regulation issued on 27 October 2011, and may impact hedge funds and money market funds which may be viewed as "non-bank credit intermediation in the financial system" (ie shadow banking).
- Packaged Retail Investment Products ("PRIPS"): Legislative proposals in this area will be introduced to ensure a high and consistent level of investor protection, with a level playing field for the originators and distributors of retail investment products and increased efficiency in cross-border business. (Q1 2012)
- Third Anti Money Laundering Directive: The Commission has begun its post-implementation review of the Third Anti Money Laundering Directive and a report is planned in March 2012. The Financial Action Task Force ("FATF") is also in the process of revising its standards and should adopt new standards in February 2012. The Commission states that the EU will rapidly implement the new standards into its legislation ahead of the new round of FATF evaluations.
Continuing to Network - Update on Ireland's Double Tax Treaties
In total, Ireland has now signed comprehensive double taxation agreements with 64 countries, of which 56 are in effect.
Ireland signed double tax treaties with Armenia and Saudi Arabia on 14 July 2011 and 19 October 2011 respectively. On 8 April 2011, Ireland’s agreement with Singapore came into force, effective from 1 January 2011. Ireland’s new agreement with Hong Kong, which was signed on 22 June 2010, came into force on 10 February 2011 and will be effective from 1 January 2012. An updated agreement with Germany was signed on 30 March 2011 and negotiations for new agreements with Panama, Thailand and Uzbekistan have been concluded and these agreements are expected to be signed shortly. Work is also underway to negotiate new agreements with other countries (including Argentina, Azerbaijan, Egypt, Tunisia and Ukraine) and to update certain existing agreements (including Ireland’s agreements with Cyprus, Italy, Korea, Pakistan and France).
Ireland’s comprehensive tax treaty network continues to be an important part of its overall attractiveness for inward investment.(
This update also appeared in the Matheson Client Ezine: International Business Update November 2011).
EU Commission publishes CRA III Proposals
On 15 November, the EU Commission published a regulation amending the EU Regulation on credit rating agencies ("CRAs") and a directive amending the UCITS IV Directive and the Alternative Investment Fund Managers Directive (“AIFMD”). The key proposals in the regulation relate to over-reliance on external credit ratings and CRAs' transparency; sovereign debt ratings; conflicts of interest and civil liability of CRAs. The European Securities and Markets Authority (“ESMA”) will be barred from including references in its guidelines, recommendations and draft technical standards that may trigger "mechanistic reliance on credit ratings". The proposals also introduce a "rotation rule" that, except in certain circumstances, would prevent a CRA from issuing ratings for an issuer for more than three years, if it is paid by the issuer for ratings. Issuers of structured finance products would be required to obtain credit ratings from two CRAs.
The proposed directive amending UCITS IV and AIFMD is intended to reduce over-reliance on external ratings by funds, specifying that fund managers should not solely or mechanistically rely on external credit ratings for assessing the creditworthiness of fund assets.
A copy of the proposed regulation on CRAs is available here. A copy of the proposed directive amending UCITS IV and AIFMD is available here.
If you would like clarification or advice on any item referred to in this Legal and Regulatory Update, please get in touch with your usual Asset Management and Investment Funds Group contact.