leading edge conference series 13 July 2010 - · PDF fileshare with you an ALFI TASC driven...
Transcript of leading edge conference series 13 July 2010 - · PDF fileshare with you an ALFI TASC driven...
leading edge conference series13 July 2010
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Still swimming in a seaof regulatory and industry
developments…
Welcome to the ALFI TA & Distribution Forum 2013
Still swimming in a sea of regulatory and industry developments...
Since we launched the Luxembourg TA & Distribution Forum community in 1999, this is actually the 14th year that we hold a yearly TA Forum in Luxembourg. I want to firstly, Thank You All, for keeping this important community going strong.
In light of the turbulent times we are all facing and going through in our beloved fund industry, it is an opportune time to get back to basics, back to where we started from, 14 years ago, when we held our very first Luxembourg TA & Distribution Forum which was, basically:
To bring together industry peers to share experiences and discuss issues related to global fund distribution operations, specifically those topics affecting
Global Transfer Agency and Global Distribution Support Services.
During this year’s TA Forum, we will aim to do just that.
We will consider the influence that key regulatory and industry events have on the way we conduct TA and Distribution SupportServices’ business and how we are shaping and developing capabilities to be ready and aligned with the ever changing face of the global fund industry.
We will openly discuss, how Luxembourg fund industry players are dedicated to ensure the ease of doing business in Luxembourg-domiciled funds amidst the sea of regulatory impacts and industry developments affecting us all today.
Welcome to the ALFI TA & Distribution Forum 2013
The morning will cover dedicated FOCUS sessions on the Luxembourg fund industry, the Global Distribution landscape, theRegulatory developments impacting Global TA and Distribution Support Services from now to…, and, last but not least, we willshare with you an ALFI TASC driven Distributor Satisfaction Survey with a live debate with Distributors on the topic of DistributionSupport Services.
The afternoon will highlight how we Support and Deliver the message in a bottle and provide an opportunity for allparticipants to share their views. The afternoon sessions will be set in 2 consecutive breakout sessions, splitting up into smallergroups to foster open question and answer sessions on 2 key themes:
1) Hot Off the TA Regulatory Press!2) Distribution Operations & Infrastructure Developments
I would like to take this opportunity to specially thank the ALFI TA Steering Committee (“TASC”) members and their respectiveorganisations for their commitment in making this yearly event happen. Most importantly, I extend my gratitude for the work athand and key deliverables undertaken by the ALFI TASC working groups to enable the ease of doing business in Luxembourg-domiciled funds in support of the interests of the asset managers, asset servicers and related service providers of theLuxembourg fund industry.
On behalf of all of us TASC members, we trust that we have put together an interesting programme for you and hope that you willbenefit from the ALFI TA & Distribution Forum 2013.
We are honoured that you will enjoy with us, this yearly summit bringing together the fund industry’s operational practitioners.
Finally, a big thank you to ALFI for the venue, the ALFI events team for supporting us throughout the day, and the ALFI TASCsponsors for the day’s catering and the logistics of the day.
With kind regards to all participants,
JoséeJosée DenisChairman, ALFI TA & Distribution Forum
Welcome & Introduction
François DrazdikSenior Industry Affairs Adviser
ALFI
Welcome & Introduction
Josée Lynda DenisCEO Luxembourg,
Head of Depository BankStandard Chartered Bank Luxembourg
Morning programme – FOCUS on the industry today8:30 - 9:00 Registration & breakfast
9:00 - 9:30 Welcome & Introduction• Update on ALFI and the Luxembourg Fund Industry• Introduction of the day‘s agenda with an ALFI TASC 2012/2013 update
Francois Drazdik, Senior Industry Affairs Adviser, ALFIJosée-Lynda Denis, CEO, Standard Chartered Bank - Luxembourg Branch
9:30 - 10:30 An update on Global Distribution trends• Deep dive into the impact of AIFMD - Will AIFs change the landscape of the Luxembourg Fund industry? An interview
with AIF Managers
Moderator: Christophe Saint-Mard, Partner, PwCInterviewees: Daniela Klasèn-Martin, Managing Director, Crestbridge
Enrico Turchi, Managing Director, Pioneer Asset Management
10:30 - 11:00 Coffee Break
11:00 - 11:30 Focus on Distribution Support ~ A live Distributor Survey• The voice of the Distributor – a roundtable discussion with Distributors
Moderator: Raymond Groen in ‘t Woud, Vice President, BNY MellonEuropean TA – Business Support & Strategy
Panelists: Richard Lepère, Managing Director, FundChannelSven Gräbedünkel, BHF Bank, Fund Execution platform
11:30 -12:30 Regulatory Focus • The sea of regulatory impacts to the Luxembourg fund industry• An update on the latest AML/KYC regulatory developments
Xavier Balthazar, Partner, PwC Marco Zwick, Head of Compliance and Risk, Continental Europe and Middle East, Schroder Investment Management, Luxembourg
12:30 - 14:00 Buffet Lunch
Afternoon programme – Delivering the message in a bottle…14:00 - 15:00 Workshop 1 (in parallel to Workshop 2)
Hot off the TA Regulatory Press!• AIFMD and the impact to TA and Distribution• A FATCA Update
Moderator: Gudrun Goebel, COO Cross Border Fund Processing Services, Société Générale Securities Services Luxembourg
Panelists: Sue Lee, Head of Process and Quality Governance, Global Distribution Support and Transfer Agency Services,HSBC Securities Services Pierre Mottion, Global Head of Transfer Agent and Fund Dealing Products, BNP Paribas Securities Services, Luxembourg
14:00 - 15:00 Workshop 2 (in parallel to Workshop 1)
Distribution Operations & Infrastructure Developments• Standardisation – where do we stand today?• Infrastructure developments: migration update and ISO20022 benefits brought forward
Panel discussion: « What’s next? Or how the current industry changes would affect the landscape in 5 years from now… »
Moderator: Valérie Letellier, Market Manager, Funds, SWIFT
Panelists: Sophie Thibeau, Director, Product Management-Funds, EuroclearJames Bolton, Executive Director, EMEA Transfer Agency & Distribution Support, JP MorganOlivier Portenseigne, CCO, FundSquareRaphael Machet, Global Product Manager Fund Dealing Services, BNP Paribas Securities Services Luxembourg
15:00 - 15:30 Coffee Break
15:30 - 16:30 Workshop 1 and 2 will be repeated.
To foster open question & answer sessions, the afternoon sessions are set in 2 consecutive breakout sessions, splitting up the number of participants into smaller groups.
16:30- 16:45 Chairperson’s closing remarks
16:45 - 18:30 Closing cocktail
Update on the ALFI TA & Distribution Forum
ALFI TA & Distribution Forum today
Chairperson Josée-Lynda DenisALFI Coordinator François DrazdikBNP Paribas Securities Services Pierre MottionBNY Mellon Raymond Groen in ‘t Woud CACEIS Investor Services Laurent Majchrzak – Jerome VaroquiCiti Mathew Newnham Clearstream Stéphane PallottaEuroclear Sophie Thibeau – Lieven LibbrechtFundSquare Olivier PortenseigneHSBC Securities Services Sue Lee – Valérie HesseJP Morgan James BoltonKNEIP Communication Mario MantrisiLemanik Asset Management Steve BernatPricewaterhouseCoopers François GénauxRBC Investor Services Gilles Moreau - Beppe MalinverniSchroders Investment Management Gary JanawaySociété Générale Securities Services Gudrun GoebelState Street Bank / IFDS Junead Kabir – Jan DemarestS.W.I.F.T. Valérie LetellierVictor Buck Services Edith Magyarics - Jean-François Valette
TA Forum Steering Committee “TASC”SOUNDING BOARD
The Luxembourg TA & Distribution Forum
(launched in 1999)146 participants93 organisations24 nationalities
Across 14 countries/regions
The ALFI TA & Distribution Forum
Asia
TA & Distribution Forum structure
TA & Distribution Forum
TA Forum Steering Committee
TA Operations WG
1. Standardisation
2. Distribution Support Services
3. TA Regulatory
Communication WG
1. Marketing & Communication
Articles
2. Events
Luxembourg TA & Distribution Forum
3. Industry Associations: Building Bridges
4. Luxembourg Fund Infrastructure
ALFI/HKIFA Cooperation Agreement
ALFI TASC Asia
5. TA Survey 2013
Operations WG
TA Operations WG
1. Standardisation WG Chair: Valérie Letellier
– WG representatives: Sophie Thibeau, Natascha Hector-Weertz, Olivier Portenseigne, Jean-François Valette, Jérome Varoqui, CR Boniver (ALMUS, Findel), Gary Janaway (Chairman Findel Group)
2. Global Distribution Support WG Chairs: Steve Bernat, Raymond Groen
– WG representatives: Josée Denis, Laurent Majchrzak, James Bolton, Junead Kabir, James Bolton
3. TA Regulatory WG Chair: Pierre Mottion
– James Bolton, Gudrun Goebel , Valerie Hesse, Beppe Malinverni
4. Luxembourg Fund Infrastructure WG Chair: Gary Janaway
– WG representatives: WG representatives: Gudrun Goebel , Carlo Matagne (Luxbg T2S NUG), Kathy Shackle (Fidelity)
5. TA Survey 2013 WG Chairs: Josée Denis, François Génaux
– WG representatives: Marco Bretz (PwC)
1. Standardisation WG Luxembourg Standardisation Market Group KTF initiative SWIFT/EFAMA Standardisation Survey October 2013 Corporate Actions for Funds: White Paper
2. Global Distribution Support WG Distributor Survey 2013 KYD
ALFI TASC Luxembourg – 2013/2014 Roadmap
3. Regulatory Impacts TASC WGs feeding into related ALFI Committees Position Paper 4Q2013: AIMFD treatment of subscriptions and
redemptions FATCA Q&A ALFI/ALCO AML Recommendations Outsourcing re: CSSF circular 12.552 Dematerialisation of fund shares
4. Infrastructure WG T2S For Funds Fund market infrastructures
5. Luxembourg TA Survey 2013 14 participants
ALFI TASC Luxembourg – 2013/2014 Roadmap
6. Events
ALFI TA & Distribution Forum 2013 – 14 November 2013
ALFI Asia Roadshow 2013, 4 and 5 December 2013 in Singapore and Hong Kong - Presentation and panel discussion on
“Cross-border Asset Servicing– Building bridges between Asia and Luxembourg”
ALFI TASC Luxembourg – 2013/2014 Roadmap
Mission statement & objectives
Initiatives status update
ALFI TASC Asia – 2013/2014 Roadmap
Mission statement: Ensure continuity of the ALFI TA & Distribution Asia while Ching is on
maternity leave
Objectives & scope: focus on deliverable(s) that can be achieved in this timeframe and that
could provide value to community in Asia
Mission statement & objectives
ALFI TA & Distribution Forum Asia
Chaiperson Marco Attilio (SWIFT Asia)ALFI Hong Kong – Coordinator Ching Yng ChoiAllen & Overy Hong KongBBH Hong KongBNP Paribas Securities Services SingaporeCACEIS Hong KongClearstream Hong KongEuroclear Hong KongHSBC Securities Services Hong KongStandard Chartered Bank Singapore and Hong KongS.W.I.F.T. Singapore and Hong Kong
TA Forum Steering Committee “TASC”
SOUNDING BOARD
The ALFI TA & Distribution Forum
Luxembourg
1. Regulation WG (leaders: BNP Paribas, Euroclear) The focus would be on how global or local regulations will impact our industry
(TAs, distributors, iCSDs, and other stakeholders) Focused jurisdictions are: Hong Kong, Singapore, Taiwan, Japan, South
Korea and in a second stage, Mainland China, Australia, Thailand, Malaysia, Vietnam, Indonesia.
Suggested topics are: FATCA, AIFMD, AML/KYC conflict of interest, role of the depositary bank (UCITS IV), progress made on UCITS VI.
2. Operations WG (leader: SWIFT) The group would like to document the market dynamics and statistics for the
funds industry to act as a knowledge base for our industry.
3. Education WG (on hold) Annual/bi-annual distributor’s forum or breakfast seminar
Initiatives status update
FOCUS on
Global Distribution Trends
Moderator/Interviewer: Christophe Saint-Mard, Partner, PwCInterviewees: Daniela Klasèn-Martin , Managing Director,
CrestbridgeEnrico Turchi, Managing Director, Pioneer Asset Management
Agenda
Global Distribution Trends
AIFMD• The marketing passport• AIFMD benefits• Market access options: Passport or Private placement
Deep Dive into the impact of AIFMD - Will AIFMD change the landscape of the Luxembourg fund industry?
Distribution Trends
* 92% of true cross-border funds are UCITS
Over 3,000
1,000 – 2,999
500 – 999
100 – 499
Less than 100
No. cross-border funds registered for sale 6/2013
Regions for Cross-Border DistributionSuccessful distribution of cross-border funds*
3 2603 750
4 529 4 875 5 1705 907
6 5257 366 7 441
7 9078 511
9 436 9 517
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jun- 2013
Luxembourg Ireland UK France Germany Other Number of truex-border funds
Num
ber of cross-border funds
Num
ber o
f cro
ss-b
orde
r reg
istra
tions
Average registrations per true cross-border fund
7.0 7.2 5.7 5.8 7.0 7.3 7.6 7.7 7.9 7.9 7.7 7.7 7.8
Source: Lipper LIM and PwC analysis, June 30, 2013.
Evolution of cross-border distributionNumber of cross-border funds & registrations
1 250,9
1 783,8 1 738,9
2 124,3
2 613,9
0
500
1 000
1 500
2 000
2 500
3 000
2005 2007 2009 2011 juin-13
AuM* of cross border funds (€ billion)
Source: Lipper LIM and PwC analysis, June 30, 2013. * Estimation based on Lipper LIM data.
Evolution of cross-border distribution
322347
400425
460 463491
0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 juin-13
Source: Lipper LIM and PwC analysis, June 30, 2013.
Num
ber o
f gro
ups
Number of cross-border management groups
Cross-border asset management groups
• 12% growth in cross-border funds since Jan 2012 – but only 1% in 6 months to 30 June 2013;
• 11% growth in registrations for distribution since Jan 2012 – but only 2% in 6 months to 30 June 2013;
• AuM in cross-border funds 52% higher since the GFC – 23% AuM growthin past 2 years;
• 100% growth since 2006 in the number of managers with cross-border funds.
Evolution of cross-border distributionSome takeaways
Hotspot markets – top new registrations 6 months to 30 June 2013
Country New registrations in 2013
Total number of registrations
2013Norway 282 +14.5%Cyprus 212 +96.4%Sweden 207 +6.2%Finland 173 +6.3%France 162 +3.7%Malta 160 +118.5%
Source: Lipper LIM and PWC analysis, data as at June 30, 2013.
Country New registrations in
2013
Evolution in the total number of registrations
2013 2012Norway 282 +14.5% +16%Cyprus 212 +96.4% +6%Sweden 207 +6.2% +9%Finland 173 +6.3% +8%France 162 +3.7% +13%Malta 160 +118.5% -2%
Hotspot markets – top new registrations 6 months to 30 June 2013
Source: Lipper LIM and PWC analysis, data as at June 30, 2013.
Hotspot markets – Decline in registrations 6 months to 30 June 2013
Country Decline in registrations in 2013
Total number of registrations
2013UK -166 -3.3%
Switzerland -98 -1.8%Taiwan -79 -9.1%
Hong Kong -21 -1.7%Chile -105 -8.2%
Source: Lipper LIM and PWC analysis, data as at June 30, 2013.
Country Decline in registrations in
2013
Evolution in the total number of registrations
2013 2012UK -166 -3.3% +15%
Switzerland -98 -1.8% +10%Taiwan -79 -9.1% +1%
Hong Kong -21 -1.7% -2%Chile -105 -8.2% +19%
Hotspot markets – Decline in registrations 6 months to 30 June 2013
Source: Lipper LIM and PWC analysis, data as at June 30, 2013.
• Growing product rationalization for cross-border marketing (e.g. at shareclass level to reduce distribution/compliance costs);
• MiFID II, RDR – forcing changes to distribution strategies;
• 3 Asian passport initiatives: HK – China mutual recognition; Asian fund passport (4 countries pilot project launching in 2016); ASEAN mutual recognition (professional investors distribution with
limited & common requirements);
• AIFMD - Alternative fund managers assessing use/benefit of theMarketing Passport.
Cross-border fund distribution trends and new regulations
AIFMD
The marketing passport
The Marketing passport
In scope of the AIFMD marketing provisions
• 4 conditions:
- Marketing of AIF (“a direct or indirect offering or placement);- At the initiative of the managing AIFM;- To professional investors domiciled or with a registered office in the EU;- In the EU.
• A notification process is required from Home to Host regulator to start marketing.
Passive marketing or “reverse solicitation” outside the scope of AIFM Directive
AIFMD Benefits
• Establishment of common requirements to achieve a passport to distribute on across border basis to professional investors; Consistent approach to market to professional investors in the EU.
• Set up of minimum conditions for marketing in the EU without passport (Article 42 ofthe AIFMD directive);
Each M.S. can have stricter rules and may forbid marketing withoutpassport to professional investors.
• To open the EU market to non EU AIFM/AIFs; What are the options to market in EU to professional investors?
Overview of the market access options
EU AIFM/EU AIF EU PASSPORT
EU AIFM/Non EU AIF
Non EU AIFM/ EU AIF
Non EU AIFM/Non EU AIF
Private Placement
EU Passport ?
Private Placement
Private Placement
?
?
?
EU Passport ?
EU Passport ?
2014 2015 20182013
Market access options: Passport or Private placement
Options for marketing to EU professional investors:• EU AIF managed by EU AIFM – ONLY with Passport;• Others – until 2015 - ONLY private placement. (article 42).
Options for non-EU AIFs and AIFMs marketed to EU professional investors:Dual system• Passport available (subject to ESMA’s positive opinion);• NPPR still allowed under minimum requirements (in article 42).
Access to EU professional investors ONLY with EU passport; Potential phasing out of the NPPR.
Coexistence of Passport and Private placement
2013
2015
2018
Market access options: Private placement
Before AIFMD: National rules govern the ability to market non harmonised funds to professional investors;
AIFMD: Articles 36, 42 and 43 set up minimum conditions for marketing in the EU without passport but M.S can have stricter rules and may forbid marketing without passport to professional (and may not allow marketing to retail investors).
With AIFMD implementation,
some M.S are reviewing/changing their PPRs
Market access options: Private placement
• Private placement regulated at national level in a number of different ways and often opaque;
• This creates:- Uncertainty on what can be offered and under what conditions;- Legal uncertainty on the transactions;- Costs to find out about the rules and to comply;- Missed opportunities.
Market access options: Private placement
Cooperation arrangements are in place between AIF’s country, AIFM’s MS and target MS;
The AIFM complies with the AIFMD’s transparency requirement (AR, reporting to investors/regulators);
The AIF is not established in a country listed as a NCCT by FATF; The targeted member states must allow private placement; The AIFM complies with the specific Host MS additional country requirements
for marketing to professional investors under PP.
Private Placement permitted to non-EU structures if:
Market access options: Private placement
• There are important benefits for the investment fund industry to allow transactions under private placement;
• But no regime at EU level and national regimes are more closing than opening to private placement;
• Closing private placement between professionals for UCITS funds could be detrimental as institutional investors have the majority in UCITS funds;
• Is the future an EU private placement regime or simply passport or nothing (ESMA decision)?
Market access options: Private placement
What will be the AIFMD impact in Luxembourg?
Luxembourg actual landscape
Luxembourg leading position
• Largest investment centre in EU (more than EUR 2,400 in AUM).
• 1st funds distribution centre (Luxembourg domicilied funds are offered in more than 70 countries).
• 2nd largest investment centre in the world.
• Dominant share in both retail and institutional marketplace in EU.
Luxembourg actual landscape
Luxembourg UCITS market share: Luxembourg AIFs market share:
Top 5 European countries holding the higher Net Assets.
ESMA statistics Q2
AIFMD impact for Luxembourg
Non-EU Alternative Asset Managers choose Luxembourg for their AIF’s
POSITIVE
Non-EU Alternative Asset Managers do not choose Luxembourg for their AIF’s
NEGATIVE
Will non-EU Alternative Asset Managers chooseLuxembourg?
AIFMD impact for Luxembourg
Luxembourg
Efficient & reliable fund infrastructure;
Leading fund center;
Nearly 300 regulated financial service companies
with expertise in administration, custody and
distribution of funds;
42,000 financial services professionals employed;
190 management companies;
149 banks from 23 countries;
103 Transfer Agencies.
Longstanding experience;
Over the last 25 years, fund service providers have
accumulated knowledge of the AM industry including alternative investments;
Fund lawyers, audit firms, tax advisors highly
experienced;
Technology & expertise constantly evolving;
Active investment fund association (ALFI);
CSSF an accessible & industry focused regulator.
AIFMD impact for Luxembourg
LuxembourgStrategic position;
Central location;
70% of EU wealth within 700Km of Luxembourg;
Attractive for highly educated professionals.
Stable politically, socially & economically;
fiscal stability (low government debt and low deficit levels);
Strong thriving economy.
World wide recognition;
Longstanding relationshipsbetween CSSF and authorities of UCITS
distribution.
Business oriented legal framework and competitive tax
regime;
Fund creation, merger & liquidation;
Multi-lingual regulator (English, French, German).
AIFMD impact for Luxembourg
International professionals;
Concentration of international investment fund’s experts (Nearly 50% of residents are not Luxembourgish);
The word’s biggest fund managers use Luxembourg as their distribution hub.
Largest Fund distribution centre;
With experienced professionals in cross-border distribution matters.
Luxembourg
AIFMD impact for Luxembourg
AIFMD presents an opportunity for Luxembourg to create a brand in the alternative fund market (as the one created for UCITS).
With Luxembourg’s expertise, experience and leading position in the investment fund’s industry, there are many good arguments in favor of Luxembourg as a chosen destination for non-EU Alternative Asset Managers.
Now the interview!!Deep dive into AIFMDWith AIF Managers…
Breakfast kindly sponsored by
Refreshment break kindly sponsored by
Lunch kindly sponsored by
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Cocktail reception kindly sponsored by
Voting system kindly sponsored by
TA Forum 2013 pack kindly sponsored by
FOCUS on
Distribution SupportThe Voice of the Distributor
Moderator: Raymond Groen in ‘t Woud, Vice President, BNY Mellon European TA – Business Support & Strategy
Panelists: Richard Lepère, Managing Director, FundChannelSven Gräbedünkel, BHF Bank, Fund Execution platform
Distribution Support ServicesThe 2012 Value Chain
Voting system sponsored by KPMG Luxembourg S.à r.l.Voting system sponsored by
2012 Live Survey… 1st Question
Voting system sponsored by KPMG Luxembourg S.à r.l.
2012 Live Survey… 2nd Question
Voting system sponsored by KPMG Luxembourg S.à r.l.
2012 Live Survey… 3rd Question
2012 Live Survey… 4th Question
2012 Live Survey… 5th Question
The Distributor’s Perception of TA’s
1. Current challenges for distributors MiFID2 open vs guided architecture
2. Where should TA’s improve on services from a distributor perspective Onboarding Client Servicing & Query Management Standardisation from a Distributor perspective
3. What TA’s are not expected to deliver to the distributors
Regulatory FOCUS
Xavier Balthazar, Partner, PwC
Marco Zwick, Head of Compliance and Risk, Continental Europeand Middle East, Schroder Investment Management, Luxembourg
Regulatory FOCUS
Times are changing ...
20152014
FATCA
UCITSV (VI)Solvency II
INSURANCE
EMIR /CCP
AIFMD
Single Supervisory Mechanism
DoddFrank
Bank structure
CRD IV
BANKING
IMD II
Packaged Retail
Investment Products
Credit rating
agencies
MiFID II
Live!
Partly live!
Q4 2016
Q3 2016
Q2 2016
European Long Term Investment
Funds
Money Market Funds
Q4 2014
Q4 2014
Q1 2014
Slow progress
Central Securities
Depositaries
Not known
2015
Q1 2016
Financial Benchmarks
Q1 2016
Bank recovery
and resolution
2015
Partly live!
Q1 2014
Q4 2014
Q4 2014
ASSET MANAGEMENT... fast
2016
Regulation on European Long Term Investment Funds
European Long Term Investment Funds (“ELTIFs”)
ELTIFs must be closed to
redemptions and invest at least
70% of capital in unlisted assets
ELTIFs have a passport
(through the AIFM) for retail distribution in
the EU!!
Very important new category of fund if the definition of
eligible assets remains that
broad
A “spin off” of AIFMD: ELTIFs are AIFs which are submitted
to specific constraints
Go live
Q4 2014
AM
CYTADIPRIN
FA
Impact rating
Regulation on European Long Term Investment Funds
AIFM UCITS ELTIF
Regulatory approach A manager regulation
A product and a manager regulation
A product and a manager regulation
Eligible assets Liquid assets No restriction Non liquid assets
Ability for investors to redeem
Opened to redemptions – Min 2x per month
No restriction Closed to redemptions
Passport for distribution Yes – to any type of investors incl. retail
Yes – to professional investors only
Yes – to any type of investors incl. retail
Regulation on Money Market Funds
Money Market Funds which are UCITS or AIFs
MMFs invest in short term assets
and aim at offering returns in line with MM rates or value
preservation.
Two types of MMFs: Short Term MMs
and Standard
MMFs
CNAVs only allowed if 3% NAV buffer for compensating any difference
between CNAV and real NAV
A “spin off” of AIFMD and
UCITSD: MMFs are UCITS /AIFs
which are submitted to
specific constraints
“MMFs” or use of similar terms
restricted to Regulation compliant
funds
Rules on assets’ eligibility, investment
limits, credit risk assessment, stress
testing, regulator reporting, valuation,
etc.
Go live
Q4 2014
AM
CYTADIPRIN
FA
Impact rating
AIFMD – Impacts for TAs
AIFMD Impacts for TAs
Depositary to ensure that S/R are performed in
line with regulations and
fund documentation
Cash belonging to AIFs must be recorded on AIFs accounts – pay attention to collection
accounts and accounts opened at
intermediaries: Is it cash of the fund or
not?
Depositary to reconcile each
cash flow movement and identify material
cash flows
AIFM (TA by delegation) to provide timely
S/R confirmation – content is
prescribed by art. 26 L2
Go live AIFMD
22 July 2013
Impact ratingAM
CYTADIPRIN
FA
Luxembourg recent regulatory changes...
CSSF Circular 13/559 ESMA guidelines on ETFs and other UCITS issues Q1 2013
Regulation 345/2013 Regulation on European venture capital funds Q2 2013
Regulation 346/2013 Regulation on European social entrepreneurship funds Q2 2013
Massive wave of regulatory changes is not stopping. The financial industry remains under strong pressure from regulators
Threat on money market funds : Is this the end of money market funds (no rating)? Or the end of CNAV money market funds?
But one good news: new legislation on retail distributed long term funds moves fast. If the text is voted as currently drafted (there is a risk that the draft regulation will be amended to narrow the scope of eligible assets…), this will create opportunities for asset managers and push traditional asset managers to expand their product offer in the non listed / non liquid space!
Conclusion – as last year!
Regulatory FOCUSAn AML UpdateBy: Marco ZWICK
Schroders
Law of 27 October 2010 (i) enhancing the anti-money laundering and counter terrorist financing legal framework; (ii) organising the controls of physical transport of cash entering, transiting through or leaving the Grand Duchy of Luxembourg; (iii) implementing United Nations Security Council resolutions as well as acts adopted by the European Union concerning prohibitions and restrictive measures in financial matters in respect of certain persons, entities and groups in the context of the combat against terrorist financing
CSSF Regulation N°12-02 of 14 December 2012 on the fight against money laundering and terrorist financing published in January 2013
ALFI/ABBL/ALCO/ALRiM “Practices and Recommendations aimed at reducing the risk of money laundering and terrorist financing in the Luxembourg Fund Industry” published on 11 July 2013
What’s new?
Responsibilities of the different actors in terms of anti-money laundering and counter-terrorist financing: Management Company, Registrar and Transfer Agent, Global Distributor and local Distributors, Depository
Practical guidance on implementing a Risk Based Approach withfocus on geographic risk
Correspondent Relationship due diligence: A Correspondent Relationship is defined as a regular relationship between the UCI or any party acting on its behalf and processing orders on behalf of the UCI, and an Intermediary which is supervised by a financial authority, transmitting orders from its Customers.
Direct Investor due diligence and associated KYC checklists
Third party introducer regime <-> Delegation•
Recommendations and Practices
Article 29 of CSSF Regulation N°12-02
The "relationships similar" to cross-border correspondent banking relationships as referred to in Article 3-2(3) of the Law include notably those established for securities transactions or fund transfers, whether on behalf of the cross-border professional as principal or of its customers.
Article 3 of CSSF Regulation N°12-02
Where the units or shares of an undertaking for collective investment or an investment company in risk capital are subscribed through an intermediaryacting on behalf of his customers, the undertaking for collective investment, its management company, the investment company in risk capital or, where applicable, the respective proxy of the professionals shall put in place enhanced customer due diligence measures for this intermediary which is applied mutatis mutandis pursuant to the terms of Article 3-2(3) of the Law, Article 3(3) of the Grand-ducal regulation and Article 28 of this regulation in order to ensure that all the obligations under the Law, the Grand-ducal regulation and this regulation or at least equivalent obligations are complied with.
Law and regulation
Article 3-2 (3) of the AML Law of 12 November 2004, as amended
In the event of cross-border correspondent banking and other similar relationships with respondent institutions (…), credit institutions and other institutions involved in such relationships must: (a) gather sufficient information about a respondent institution to understand fully the nature of the respondent's business and to determine from publicly available information the reputation of the institution and the quality of supervision; (b) assess the respondent institution's anti-money laundering and anti-terrorist financing controls; (c) obtain approval from senior management before establishing new correspondent banking relationships; (d) document the respective responsibilities of each institution; (e) with respect to payable-through accounts, be satisfied that the respondent credit institution has verified the identity of and performed ongoing due diligence on the customers having direct access to accounts of the correspondent and that it is able to provide relevant customer due diligence data to the correspondent institution, upon request.
Law and regulation
Article 3(3) of the Grand-ducal regulation of 1 February 2010
In relation to cross-border correspondent banking relationships referred to in Article 3-2(3) of the Law, credit institutions shall also: − determine from publicly available information the reputation of the respondent institution and the quality of its supervision, including whether the institution concerned has been subject to a money laundering or terrorist financing investigation or regulatory action; − assess the respondent institution's controls against money laundering and terrorist financing and ascertain that they are adequate and effective; − document the respective responsibilities in the fight against money laundering and terrorist financing of each institution.
The authorisation procedure which requires approval from the senior management includes the authorisation by the senior management and involves the anti-money laundering and terrorist financing compliance officer.
Law and regulation
Article 28 of CSSF Regulation N°12-02
(1) The obligations laid down in Article 3-2(3), (a) and (b) of the Law and in the first two indents of Article 3(3) of the Grand-ducal regulation include the obligation to gather information on: - the country of establishment of the respondent institution as well as the
applicable legal and regulatory provisions relating to AML/CFT;- the applicable supervisory authority and regime; - the property and control structure of the respondent institution.
(2) The analysis of the obtained information and the resulting decision shall be documented in writing and be available to the competent authorities. Moreover, the professional shall carry out: - a periodic review according to the risk, and, where applicable, an update of
the information on which the decision to enter into a relationship was based; - a re-examination of this relationship, where information is obtained which is
likely to weaken the trust in the AML/CFT mechanism of the respondent's country of establishment or in the efficiency of the AML/CFT controls set by the latter;
- verifications and periodic assessments according to the risk so that the respondent institution ensures at all times the compliance with the subscribed commitments, notably with respect to the communication, without delay and upon request, of relevant identification data of customers with direct access to payable through accounts opened for them.
Law and regulation
Due diligence at two levels
Due diligence on the Intermediary (Respondent):- Normal due diligence in accordance with article 3 (2) of the Law; or- Subject to a lower risk, adaptation of the extent of normal due diligence
measures on a risk-sensitive basis; or- Subject to a higher risk, enhanced due diligence in accordance with article
3-2 of the Law in addition to the normal due diligence measures defined in article 3 (2) of the Law.
Enhanced due diligence on the Correspondent Relationship in addition to due diligence on the Intermediary (Respondent):- Gather sufficient information about the Intermediary to understand fully the
nature of the Intermediary's business and to determine from publicly available information the reputation of the Intermediary and the quality of supervision; and
- Evaluate the Intermediary's anti-money laundering and anti-terrorist financing controls; and
- Obtain approval from Senior Management of the UCI/Professional before establishing a new Correspondent Relationship; and
- Clearly understand the respective responsibilities of the UCI/Professional and of the Intermediary.
Recommendations and Practices
Recommendations and Practices
EEA/EU/Equivalent Intermediary
(COUNTRY LIST 1)
RIN Intermediary
(COUNTRY LIST 2)
Intermediary in jurisdiction with strategic AML/CTF deficiencies
(COUNTRY LISTS 3 AND 4)
Adaptation of the extent of normal due diligence measures on a risk-sensitive basis on the Intermediary.
AND
Enhanced due diligence measures on the Correspondent Relationship.
Normal due diligence measures on the Intermediary.
AND
Enhanced due diligence measures on the Correspondent Relationship with written documentation of the AML/CTF responsibilities of the Intermediary.
. Enhanced due diligence on the Intermediary (including certification of relevant identification documents of the Intermediary).
AND
Enhanced due diligence measures on the Correspondent Relationship with detailed written documentation of the AML/CTF responsibilities of the Intermediary.
AND
Intermediary’s written commitment to provide relevant Customer due diligence data to the UCI/Professional upon request.
Recommendations and Practices
Intermediary in jurisdiction subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing risks emanating from the jurisdictions
(COUNTRY LIST 5)
As part of the counter-measures to protect the financial system from the on-going and substantial money laundering and terrorist financing risks, no Correspondent Account will be opened. The UCI/Professional is responsible for the due diligence on the underlying Investor of the Intermediary, as defined in the Regulation.
Preparation for 4th FATF Mutual Evaluation Round: review of FATF assessment methodology with focus on efficiency
Preparation of 4th EU AML Directive
Definition of “tax crimes (related to direct taxes and indirect taxes)” as new predicate money laundering offence – no update
Legislation on banning the financing of cluster munitions in a number of EU countries
Prohibition of proliferation financing
Outlook
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Afternoon programme – Delivering the message in a bottle…14:00 - 15:00 Workshop 1 (in parallel to Workshop 2)
Hot off the TA Regulatory Press!• AIFMD and the impact to TA and Distribution• A FATCA Update
Moderator: Gudrun Goebel, COO Cross Border Fund Processing Services, Société Générale Securities Services Luxembourg
Panelists: Sue Lee, Head of Process and Quality Governance, Global Distribution Support and Transfer Agency Services,HSBC Securities Services Pierre Mottion, Global Head of Transfer Agent and Fund Dealing Products, BNP Paribas Securities Services, Luxembourg
14:00 - 15:00 Workshop 2 (in parallel to Workshop 1)
Distribution Operations & Infrastructure Developments• Standardisation – where do we stand today?• Infrastructure developments: migration update and ISO20022 benefits brought forward
Panel discussion: « What’s next? Or how the current industry changes would affect the landscape in 5 years from now… »
Moderator: Valérie Letellier, Market Manager, Funds, SWIFT
Panelists: Sophie Thibeau, Director, Product Management-Funds, EuroclearJames Bolton, Executive Director, EMEA Transfer Agency & Distribution Support, JP MorganOlivier Portenseigne, CCO, FundSquareRaphael Machet, Global Product Manager Fund Dealing Services, BNP Paribas Securities Services Luxembourg
15:00 - 15:30 Coffee Break
15:30 - 16:30 Workshop 1 and 2 will be repeated.
To foster open question & answer sessions, the afternoon sessions are set in 2 consecutive breakout sessions, splitting up the number of participants into smaller groups.
16:30- 16:45 Chairperson’s closing remarks
16:45 - 18:30Closing cocktail
Supporting and Deliveringthe message in a bottle…
Listening to investorsListening to investors
BREAKOUT SESSION 1
Hot off the TA Regulatory Press!
Hot off the TA Regulatory Press!
Moderator: Gudrun Goebel, COO Cross Border Fund Processing Services, Société Générale Securities Services Luxembourg
Panelists: Sue Lee, Head of Process and Quality Governance, Global Distribution Support and Transfer Agency Services, HSBC Securities Services Pierre Mottion, Global Head of Transfer Agent and Fund Dealing Products, BNP Paribas Securities Services, Luxembourg
AIFMD – What about TA and Distribution ?
As part of the distribution chain and ownership chain, TA and Distribution are impacted by AIFMD for the restitution of assets and investor protection.
Various regulation items in EU regulation No 231/2013 of 19 December 2012 and in national laws
Topic Legal Reference
Impact on TA and Distribution
Holding fund assets in custody Articles 88 / 89
To hold funds assets in Custody, depositaries will perform due diligence on third-party fund administrators (i.e. Transfer Agents)
Reporting on subscriptionsand redemptions orders Article 26
Very similar to UCITS IV (management company identification, time and receipt of order, payment method, breakdown of fees)
PLUS
In case of distribution thourgh 3rd party, obligations to ensurethe 3rd party complies with reporting obligations to the investor
Recording of subscriptionsand redemptions orders Article 65 Very similar to UCITS IV (management company identification,
time and receipt of order, payment method, breakdown of fees)
Registration in distributingcountries National laws Similar to UCITS with appointment of local representatives (e.g.
fund representative agents, paying agents, etc)
AIFMD panel questions
1. Have you or your clients scheduled the changes and planned the submission?
2. Are your TA / Media Fulfillment solutions ready? (note: what needs to be amended)
3. Have you amended your trustee controls (and how)?
4. How do you handle the due diligence requirements?
5. Are you / your clients applying for the “Lite” solution?
AIFMD – Due Diligence on Transfer Agents
Depositaries should do an initial due diligence on TAs they are working with (or intend to work with) following the risk based approach
Proposed classification of TAs
Classification of TAs
Impact for the depositary
White-list The depositary may accept to register target fund holdings either in their own name or in the name of the AIFM/AIF without further delay
Grey-list The depositary may accept to register target fund holdings but only in the name of the AIFM/AIF
Waiting-list The depositary must perform additional due diligence (or is in the process of performing due diligence)
Black-list
The depositary does not accept to register target fund holdings – here the depositary will alert concerned AIFMs and the board of the AIF (because they invest or intend to invest into the target funds registered with such TAs) and potentially consider refusing to facilitate the investment in the target fund
FATCA - TimelineRegulation IRS Registration Due Diligence Withholding Reporting
2013
2014
2015
2016
2017
17 Jan:Final US FATCA regulation
………:Lux IGA
………:Lux regulation
19 Aug:IRS Portal opens
By 25 Apr:For 1st FFI list
2 Jun:Publish 1st FFI listBy Nov:Lux FI obtain GIIN
From Jul:New a/c opening procedure
By 30 Jun:Pre-ex. HV a/c reviewed
By 30 Jun:All pre-ex. HV a/c reviewed
From Jan:Gross proceeds for non-compl. a/c, earliest PPP appl.
By 31 Mar:1st “light” for 2014
By 31 Mar:2nd incl. NPFFI payments
By 31 Mar:Annual for US a/c last year to IRS on NPFFI payments
FATCA – common questions
Funds / Mancos / TAs – who is responsible for what?
IGA – Intergovernmental agreement - Benefit?
Who is concerned: Are Investment funds with no US Investors not investing in US securities
impacted? Is there a difference between funds in IGA country and funds in non-IGA
country? Which FATCA Status should Funds choose? Who needs to register with the IRS?
What is meant by IGA interaction?
Why could different IGAs apply, what does that practically mean?
Sample Distribution scenarios
Fund (Lux)
Nominee (UK):Product PackageBankFinal Investor:::
Distributor (D) (D) B
Local TA (HK)CSDFinal InvestorPlatform:::
IdentificationReportingWithholding
IdentificationReporting
Withholding
IdentificationReporting
Withholding
NomineeIdentification
ReportingWithholding
IdentificationReporting
Withholding
Retail InvestorInst. InvestorNominee
Local TA
Lux IGA
Lux IGA
Lux IGA
UK IGA
D IGA or Lux IGA?
HK IGA or Lux IGA?
FATCA – Distribution and TA Impacts
Cross Border Distribution versus Fund Domicile ?
Luxembourg structures sold in Asia/America
Cayman structures administered in Luxembourg
Impact of IGA - Model 1 verses Model 2
Sub register, service desk and nominee back office service models
FATCA – Are you ready ?
Are your platform changes completed /in-progress?
Will you offer FATCA classification if you do not provide KYC?
When is the time to start remediation?
Will the funds you administer be registered with the IRS by April 2014?
Do you service funds under trust agreements?
FATCA The IGA Landscape America
America Country is considering/in negotation with US
Country and US has formally indicated intention to sign
Country has signed
Expected signing date
Bahamas Yes - 1 Q4 2013
Bermuda Yes - 2 Initialled – 2 Q4 2013
British Virgin Islands Yes - 1 Yes - 1
Brazil Yes - 1
Canada Yes - 1 Q4 2013
Cayman Islands Yes - 1 Initialled - 1 Q4 2013
Chile Yes
FATCA The IGA Landscape in Asia
Asia Country is considering/in negotation with US
Country and US has formally indicated intention to sign Country has signed Expected signing
date
Australia Yes - 1 late 2013
China Negotiations in progress.
Hong Kong Yes - 2 Q4 2013
India Yes - 1 Q4 2013
Indonesia Yes
Japan Yes - 2 Signed
Korea, Republic of Yes Q4 2013
Macau
Malaysia Yes Q4 2013
Mauritius Yes
Philippines
Singapore Yes - 1 Q4 2013
Taiwan Yes - 2 Q4 2013
Thailand Yes -1
Vietnam
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Cocktail reception kindly sponsored by
Voting system kindly sponsored by
TA Forum 2013 pack kindly sponsored by
Afternoon programme – Delivering the message in a bottle…14:00 - 15:00 Workshop 1 (in parallel to Workshop 2)
Hot off the TA Regulatory Press!• AIFMD and the impact to TA and Distribution• A FATCA Update
Moderator: Gudrun Goebel, COO Cross Border Fund Processing Services, Société Générale Securities Services Luxembourg
Panelists: Sue Lee, Head of Process and Quality Governance, Global Distribution Support and Transfer Agency Services,HSBC Securities Services Pierre Mottion, Global Head of Transfer Agent and Fund Dealing Products, BNP Paribas Securities Services, Luxembourg
14:00 - 15:00 Workshop 2 (in parallel to Workshop 1)
Distribution Operations & Infrastructure Developments• Standardisation – where do we stand today?• Infrastructure developments: migration update and ISO20022 benefits brought forward
Panel discussion: « What’s next? Or how the current industry changes would affect the landscape in 5 years from now… »
Moderator: Valérie Letellier, Market Manager, Funds, SWIFT
Panelists: Sophie Thibeau, Director, Product Management-Funds, EuroclearJames Bolton, Executive Director, EMEA Transfer Agency & Distribution Support, JP MorganOlivier Portenseigne, CCO, FundSquareRaphael Machet, Global Product Manager Fund Dealing Services, BNP Paribas Securities Services Luxembourg
15:00 - 15:30 Coffee Break
15:30 - 16:30 Workshop 1 and 2 will be repeated.
To foster open question & answer sessions, the afternoon sessions are set in 2 consecutive breakout sessions, splitting up the number of participants into smaller groups.
16:30- 16:45 Chairperson’s closing remarks
16:45 - 18:30 Closing cocktail
Listening to investorsListening to investors
BREAKOUT SESSION 2
Distribution Operations &
Infrastructure Developments
Distribution Operations & Infrastructure Developments
Moderator: Valerie Letellier, Market Manager, Funds, SWIFT
Panelists: Sophie Thibeau, Director, Product Management-Funds, Euroclear
James Bolton, Executive Director, EMEA Transfer Agency & Distribution Support, JP MorganRaphael Machet, Global Product Manager Fund Dealing Services, BNP Paribas Securities Services LuxembourgOlivier Portenseigne, CCO, FundSquare
Distribution Operations & Infrastructure developmentsAgenda
Standardisation – where do we stand today?
Infrastructure developments: migration update and ISO20022 benefits brought forward
Panel discussion: « What’s next? Or how the current industry changes would affect the landscape in 5 years from now… »
Distribution Operations & Infrastructure developmentsStandardisation – where do we stand today?
Funds Processing Standardisation Report – mid-2013 highlights
H1 2013: 14.3 million orders (+15% compared to H2 2012)
H1 2013: 3.2 million incoming faxes (+11% compared to H2 2012)
Q2 2013: total automation rate (ISO and proprietary files) = 77.8% (against 77.7% in Q4 2012)
ISO Automation: 46.4% (+2.6% compared to Q4 2012) Proprietary FTP: 31.4% (-2.5% compared to Q4 2012) Manual processing: 22.2% (-0.9% compared to Q4 2012)
Q2 2013 Luxembourg Ireland
ISO Automation 57% 24%Proprietary FTP 18% 60%
Total automation 75% 84%
Manual processing 25% 16%
Market CoverageLU and IE cross-border funds
>80% TA market coverage
Contributors32 Transfer Agents
Luxembourg & IrelandTotal order volume evolution (2009-Q2 2013)
Mid 2013 results
EFAMASurvey
20102009 2011 2012
(in millions) end 2011
mid 2012
end2012
mid 2013
Growth mid 12-end 11
Growth end 12-mid 12
Growth mid 13-end 12
Total number of orders 11.9 11.9 12.5 14.3 0% +4% +15%
2013
Luxembourg & Ireland Total standardization rate evolution – per country
Mid 2013 results
EFAMASurvey
Luxembourg Ireland
Progress on regional rates
Luxembourg Ireland
Mid 2013 results
0%10%20%30%40%50%60%70%80%90%
EMEA APAC Americas
ISO automation Proprietary Manual
Distribution Operations & Infrastructure developmentsMigration update
107
MT traffic for which both counterparties are live on MX
MT traffic for which either one or both counterparties are not yet MX‐ready
MX Live traffic
* September 2013
Incentives:• MX traffic fees decrease (since July 2011)• Test/pilot traffic 70% discount in 2013, then
gradually increasing back to standard level in 2015 (i.e. 50% of Live)
Disincentives:• MT traffic fees: surcharge introduced in Jan
2013 will increase in Jan 2014
• Monthly fee: surcharge introduced in Jan 2013 will increase in Jan 2014
• Both disincentives are subject to an « exemption rate » Will increase to 60% alignedto the expected progression of the global MX adoption rate
Migration tools & comms campaigns• Result in an increasing use of SWIFT’s
professional services around MX implementation projects
• Sustained focus on migration and renewedfocus on MT only pairs from the dedicatedFunds Migration Programme team
Distribution Operations & Infrastructure developmentsISO20022 benefits brought forward
1000+ Fund Players, 90+ Countries, 60+ million msg YTD
Mutual Funds Money Market Funds
Hedge Funds Alternative Funds
ISO 20022
AccountOpening
Settlment
Reconcilitation
Price report
Transfers
Switches
Cash Forecast
CorporateActions
Payments
Orders OrdersOrders
All Fund players
Distribution Operations & Infrastructure developmentsReinforcing business case: Funds is not the only one…
PANEL
« What’s next?
Or how the current industry changes would affect the landscape in 5 years from now… »
PANEL2. Where do you see the next priority for automation (after orders)?
1. AML/KYC
2. Trailer fees
3. Transfers
4. Settlement/reconciliation
5. Corporate Actions
6. Hedge funds
7. Other
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