Recent Numbers of Fund Management Industry in Europe

• European Fund and Asset Management Association released in January net sales information for UCITS and non-UCITS as at October 2016

• Total net assets of European funds equals to 13,756 billions• UCITS

• Total net assets of 8,428 billions

• Net inflows of 47 billions

• AIF• Total net assets 5,328 billions

• Net inflows of 15 billions

Fund Distribution Acronyms in Europe

The landscape of Fund Distribution in Europe is characterised by various acronyms for the applicable European directives on financial services

• UCITS• The Undertakings for Collective Investment in Transferable Securities Directive represents

the main framework for collective investment schemes offered to retail investors.

• AIFMD• The Alternative Investment Fund Managers Directive. Recently introduced framework to

regulate managers of alternative investment schemes offered to professional investors.

• MIFID• The Market in Financial Instruments Directive governs the provision of investment services in

financial instruments by banks and investment firms.

• PRIIPs• The Packaged Retail and Insurance Investment Product regulation introduces a key investor

information document for collective investment schemes and also other packaged investments.

UCITS

• UCITS was introduced in 1985 with the following aims:• Create a single regulatory regime across Europe for collective investment

schemes;

• Facilitate cross-border offering to retail investors via the passport.

• UCITS is a product directive and governs collective investment schemes, imposing rules in the following areas:• Organisation, management and oversight;

• Diversification, liquidity and use of leverage;

• Cross-border and domestic mergers;

• Master-feeder structures;

MiFID

• MiFID was introduced in 2007 with the following aims:• Improve competitiveness of the financial markets in the European Union;

• Create a single market for investment services and activities;

• Ensure a high degree of harmonised protection for investors in financial instruments

• In 2018 a recast version of MiFID will enter into force and will concentrate on the following areas:• Investor protection

• Conduct of business

• Organisational requirements

AIFMD

• AIFMD was introduced in July 2011 with the following aims:• Strengthen investor protection;

• Increase transparency towards regulatory authorities and investors;

• Enhance monitoring of systemic risks by regulatory authorities;

• Grant passport for marketing to European professional investors.

• AIFMD rules govern European managers of Alternative Investment Fundsmarketing their funds to European professional investors;

• AIFMD is a directive for managers and not for funds and impacts the following areas:• Conduct of business

• Transparency

• Service providers and delegation

PRIIPs

• Packaged Retail and Insurance Investment Product regulation was introduced in2014 with the aim of creating a standard common disclosure document to beused for retail investors.

• The main premise of the regulation is to enhance comparability of financialproducts through such standard pre-contractual disclosure, that is the sameacross the various sectors and product types.

• PRIIPs are:• Packaged Retail Investment Products, which is any product, irrespective of its legal form,

where the repayment can fluctuate due to its linkage to reference values or performance ofunderlying assets, not directly purchased by the investor;

• Insurance based investment products.

• UCITS are also included in the PRIIPs definition, though grandfathered until theend of 2019.

Marketing in Europe

• There is no definition of marketing at European level nor an European directive on marketing, hence marketing is governed at a local level.

• UCITS• Does not provide for a definition of marketing;• Marketing is carried out towards investors in a specific European domicile;• Focus on retail investors.

• AIFMD• Contains a definition of marketing;• Marketing is carried out towards investors with a registered office in Europe, wherever they are;• Allowed to professional investors.

• Marketing is carried out also through third parties• Third party marketers• Pension fund consultants• Cap intro

The Passport UCITS/AIFMD

Passport application

Host State Competent Authority

UCITS Fund/AIFM

Home State Competent Authority

Host State

Host State

Host State


• Single market

• Allows for sale of funds throughout Europe on the basis of authorisation in one domicile

• Introduced with UCITS directive and applied to other relevant frameworks (AIFMD, MIFID)

• From paper based procedure directly with host state regulator to electronic procedure Home State vs Host State regulator

• No additional authorisation in the Host State but subject to local rules on marketing


• UCITS passport is an electronic process between the Home State competentauthority of the fund and the Host State competent authority of the target state.

• Within 10 business days from submission of a complete application, the fund isnotified by its Home State competent authority and marketing can commence.

• Host State Authority has 5 business days to make any comments on the filereceived but this does not halt marketing.

• AIFMD passport is an electronic process similar to the UCITS passport.

• AIFMs will apply directly to the competent authorities of their Home Staterequesting for passport of their EU AIF to a specific Host State.

• Within 20 business days from submission of a complete application, the AIFM isnotified by its Home State competent authority and marketing can commence.

Private Placement

AIFM

Host State

Host State

Host State

Host State

Host State

Private Placement

• The Private Placement is not private anymore: from safe-harbour rule to notification/registration process with the regulator

• Article 42 AIFMD – private placement conditions

• Transparency requirements

• disclosure to investors

• annual report

• reporting to regulatory authorities –Annex IV

• Cooperation

• Non FATF blacklist

• Private placement today imposes compliance with certain articles of AIFMD to non-EU AIFM (mainly transparency, disclosure and reporting obligations).

Private Placement

• Gold-Plating Across Europe – member states can impose requirements in addition to the pre-condition of AIFMD for private placement.

• Appointment of depositary-lite entity

• Austria, Germany, France, Denmark

• Appointment of local agent/representative• Austria, France

• Additional documentation and requirements• Luxembourg – compliance with ESMA guidelines on remuneration

• The Netherlands –AIFM Home State certification of compliance with cooperation agreement

• Denmark – reciprocity statement from AIFM Home State authority that it will allow private placement from Danish AIFs

MiFID

• European Investment firms, once authorised in one EU domicile, can provide theirservices or perform activities throughout Europe either via the establishment of abranch or the free provision of services.

• A standard notification is made by the investment firm to the Home State competentauthority, which will liaise with the Host State competent authority. Once notification istransmitted to Host State authority, investment firm is notified by Home State authorityand activities can commence.

• So far non-EU firms had either to open branch in the EU states where they intended todo business or one subsidiary, with the ability to be passported.

• MiFID II, to enter in force in January 2018, will introduce an harmonized regime wherebyMiFID passport is also granted to non-EU investment firms, from domiciles deemedequivalent, to provide services to professional investors and eligible counterparties only.

• ESMA will be in charge of the non-EU MiFID passport process.

How can we help

• Introduction and selection of service providers

• Project management

• Passport/Private placement marketing authorisations

Veneziano & Partners Limited is registered in England and Wales with number 8416146. The fact that you receive this information does not create nor impose any relationship with Veneziano & Partners Limited. The contents of this document are for

information purpose only and represent a summary of subject matters of interest. While we endeavour to keep the information up to date and correct, we make no representations or warranties, expressed or implied, about the completeness,

accuracy and suitability thereof for any purpose. Any reliance you place on such information is therefore strictly at your own risk. The contents of this document should not be relied upon, treated as or substitute legal advice. Veneziano & Partners

Limited is not a law firm, nor provides legal advice to the public. It is not authorised nor regulated by the Solicitors Regulation Authority in England and Wales. Veneziano & Partners disclaims any and all liability for any loss or damage, including, without

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2017 veneziano and partners - european fund distribution

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