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STATE STREET GLOBAL SERVICES REGULATORY INSIGHTS WINTER 2015

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FOREWORD

Welcome to the Winter edition of the State Street Regulatory Insights Newsletter. This is our quarterly overview of important legislative and regulatory developments in the European Union (EU). In this edition, the feature article is looking at the conformance period extension of the US Volcker Rule.

We have seen no sign of a slowdown in regulatory activity over the past few months. On the contrary, 2014 ended with a big bang, when the European Securities and Markets Authority (ESMA) published its technical advice to the EU Commission (the Commission) on the Markets in Financial Instruments Directive (MiFID II). It also published a further consultation on the Markets in Financial Instruments Directive and Regulation (MiFID II/MiFIR) Level II implementing measures.

These publications – almost 1,600 pages – give crucial details on how the overhauled MiFID framework will work. ESMA is seeking further industry feedback on key details regarding pre‑ and post‑trade transparency for equity, equity‑like and non‑equity instruments as well as other important details.

This significant consultation is part of a long list of recent EMEA consultations. The list includes consultations on important issues such as:

■■ The Alternative Investment Fund Managers Directive (AIFMD) passport

■■ Asset segregation under AIFMD

■■ European Market Infrastructure Regulation (EMIR) reporting

■■ The Packaged Retail and Insurance‑based Investment Products (PRIIPs) Key Information Document (KID)

■■ Central Securities Depositories (CSD) Regulation Level 2 measures

■■ Undertakings for Collective Investment in Transferable Securities (UCITS) share classes.

These consultations form part of the broader work programme on Level 2 implementing measures, scheduled for 2015. The focus for the year will be on important matters, such as MiFID II/MiFIR and UCITS V. The work programme will also include the Bank Recovery and Resolution Directive (BRRD), Market Abuse, and the CSD Regulation. Consultation on these issues has already taken place.

The start of the New Year is a good time to pause and look ahead at what the next twelve months may bring. Already, 2015 promises to be an interesting year in politics, with elections due in the UK. At the time of writing, the Eurozone was looking anxiously at the possible impact of the outcome of the recent Greek elections, not just on the country’s own reform efforts, but also on the wider Eurozone. The May elections in the UK will be another key event, with the results of these elections determining the country’s future direction and role within the EU.

On the legislative/regulatory side, the new Commission is fully settled in and has started its work programme. This is a mix of finishing off existing files and launching new initiatives and proposals in areas such as taxation and central counterparties (CCP) recovery and resolution. The Capital Markets Union will, of course, be a flagship initiative, with a Green Paper on the initiative planned for mid‑February.

On the first of January, Italy handed over the EU Presidency to Latvia. Luxembourg will take over the baton in July.


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FOREWORD (CONTINUED)

Latvia has identified its priorities for the next six months. These include: strengthening economic governance within the Economic and Monetary Union in the Euro area; taking forward measures set out by the Commission that promote economic growth in the EU; continuing work on financial regulation; and tackling tax fraud and evasion. Specific files that will be given priority include Benchmarks, Securities Financing Transaction Reporting and Bank Structural Reform.

Progressing the EU11 Financial Transaction Tax will also be a priority. We can expect renewed focus on this with the recent statement by the French President Hollande asking his Finance Minister to move the file forward, giving added momentum to the process.

Lastly, 2015 is going to be the year, where the clearing obligation for certain derivative contracts will become reality. This is likely to happen towards the end of the year.

Overall, we have another rather challenging and interesting year ahead of us. As always, we hope that this publication provides you with a useful overview of the ongoing developments and changes in the regulatory environment.

SIMON FIRBANK VICE PRESIDENT CLIENT REGULATORY & PRODUCT SUPPORT – IRELAND STATE STREET GLOBAL SERVICES

SVEN KASPER DIRECTOR EMEA REGULATORY, INDUSTRY & GOVERNMENT AFFAIRS STATE STREET


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CONTENTS

FEATURE ARTICLE1 US Volcker Rule Conformance Period Extension

EUROPE3 ECB Responsibility for Euro Area Banking Supervision Fourth Anti‑Money Laundering Directive

4 Markets in Financial Instruments Directive and Regulation II5 Single Resolution Mechanism Contributions6 Banking Recovery and Resolution Directive Consultation7 Derivatives/European Market Infrastructure Regulation10 UCITS V11 UCITS Share Class Discussion Paper12 Alternative Investment Fund Managers Directive14 Central Securities Depositories15 Packaged Retail and Insurance‑based Investment Products16 Money Market Funds Regulation17 Bank Structural Reform18 Benchmarks

European Long‑Term Investment Funds19 The Reporting and Transparency of Securities Financing Transactions20 Institutions for Occupational Retirement Provision

CHANNEL ISLANDS21 Offshore London Listed Funds – Tax and Financial Reporting Updates23 Changes to UK GAAP – Impact on Financial Community

FRANCE24 Internal Control subject to the French Regulator25 Capital Buffers of Banking Providers and Investment Companies

GERMANY27 Act on Decreasing the Dependency on Ratings

Banking Recovery and Resolution Directive Implementation Act

IRELAND28 Central Bank of Ireland Updates AIFMD and UCITS Q&As29 Gareth Murphy Address to IFIA UK Symposium

ITALY30 Consultation on Social Security Institutions Investment Limits and Conflict of Interests31 New Decree on Pension Fund Investment Limits and Conflict of Interests32 Alternative Investment Fund Managers Directive33 Tax increase on Pension Funds and Private Social Security Schemes

CONTENTS


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CONTENTS (CONTINUED)

LUXEMBOURG34 Opinion of ESMA on Common Definition of European Money Market Funds

Immobilisation of Bearer Shares and Units35 ESMA Guidelines on ETFs and other UCITS Issues36 Accounting Treatment of Lump‑sum and AGDL Provisions37 Transposition of the EBA Guidelines on the Applicable Notional Discount Rate

UNITED KINGDOM38 Fair and Effective Markets Review Consultation39 Banking Recovery and Resolution Directive Final Rules40 Department of Work and Pensions Command Paper, ‘Better Workplace Pensions’41 Autumn Statement – Measures Affecting UK Investment Fund Industry42 FCA’s New Strategic Approach to Regulatory Challenges

ABBREVIATIONS43 Abbreviations

REGULATORY TIMELINE46 Regulatory Timeline Winter 2015

STATE STREET GLOBAL SERVICES REGULATORY INSIGHTS WINTER 2015 1

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US VOLCKER RULE CONFORMANCE PERIOD EXTENSION

The US Volcker Rule, designed to limit proprietary trading and hedge/private equity fund sponsorship and investment by banks, was enacted as part of the Dodd Frank Act in July, 2010, but the US banking regulators did not finalise the implementing regulations until December 2013. Banks are now in the process of bringing themselves into compliance with the Volcker Rule by the 21 July 2015 conformance date.

One of the more challenging compliance requirements for banks under the Volcker Rule has been identifying and bringing into conformance all sponsored investment funds that meet the US definition of ‘covered fund’ under the Rule. While the original intent of Congress was clearly to address banks’ sponsorship of hedge funds and private equity funds, the final Regulations create a definition of ‘covered funds’ that goes well beyond traditional hedge and private equity funds. This definition is further complicated when applied to non‑US fund structures, where US regulators’ attempts to apply US‑centric concepts of fund governance and structure have resulted in considerable confusion and unintended results.

For example, US regulators responded to criticism of their original Volcker proposal, which would have deemed all non‑US funds ‘covered funds’. By creating a new exception from the Rule for ‘foreign public funds’ the final Regulations appeared to provide welcome relief to banks from one of the more unneeded outcomes in the original proposal. Unfortunately, with further review, it became clear that the US regulators’ attempts to provide an exception for a broad range of non‑US funds created an even worse unintended consequence – by an oddity in the US laws, such funds sponsored by banks are banned from proprietary trading, an illogical outcome for funds whose purpose is to invest in the capital markets.

In addition to the creation of this type of unintended consequence, the final rule creates substantial compliance challenges for existing funds established prior to the December 2013 final Volcker Regulation. While banks can reasonably be expected to structure new funds offerings to comply with the final 2015 regulations, bringing older, pre‑existing funds into compliance is far more difficult. Such funds were created in accordance with the laws and regulations in existence at the time of their establishment, and many will require substantial restructuring to become Volcker compliant. In addition, in many cases, banks must divest of previously held investment interests in the fund.

As the July 2015 conformance date approaches, it is becoming clear that many banks will be filing applications with the US Federal Reserve for conformance extensions, in order to gain more time to bring covered fund structures into compliance with the Volcker Rule. On 18 December 2014, the Federal Reserve preempted most of these anticipated individual applications, and provided a blanket, industry‑wide extension of the conformance period for a large group of ‘covered funds’.


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US VOLCKER RULE CONFORMANCE PERIOD EXTENSION (CONTINUED)

Under the Federal Reserve’s extension order, all ‘legacy covered funds’, defined as those in existence as of 31 December 2013, are provided a one‑year extension to the conformance period, up to July 2016. The Federal Reserve also announced its intention to provide an additional one‑year extension in a later order, effectively providing a two‑year extension, until July 2017, of the conformance period for relationships with all ‘legacy covered funds’.

While the Federal Reserve’s extension order provides welcome immediate relief to many banks, compliance with the Volcker Rule remains a significant short‑term challenge for banks. First, while the order is quite broad, there are nuances and technical details that still must be considered to determine which bank sponsored funds are in scope for an additional two‑year conformance period. Second, any funds not meeting the terms of the order, particularly funds established post‑December 2013, must still be brought into conformance by this July. Third, the order does not provide an extension for non‑covered fund aspects of the Volcker Rule, so the conformance date for the proprietary trading restrictions and the general compliance program remains July 2015. And, finally, while the two‑year extension provides more time to comply, it does not substantively address underlying issues and unintended consequences resulting from the final Rule, such as the illogical outcome for ‘foreign public funds’ mentioned above, though it is hoped, this will be be subject to additional review and clarification prior to July 2017.


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ECB RESPONSIBILITY FOR EURO AREA BANKING SUPERVISION

On 4 November 2014, the European Central Bank (ECB) assumed responsibility for the supervision of euro area banks. The Single Supervisory Mechanism (SSM) is a new system of banking supervision, comprising the ECB and the National Competent Authorities (NCAs) of the participating countries. Its main aims are to contribute to the safety and soundness of credit institutions,

the stability of the European financial system and to ensure consistent supervision. The ECB directly supervises 120 significant banking groups, which represent 82% (by assets) of the euro area banking sector. The ECB will also set and monitor the supervisory standards for the other 3,500 banks and will work closely with the NCAs in supervising them.

FOURTH ANTI‑MONEY LAUNDERING DIRECTIVE

On 16 December, political agreement was reached on the fourth Anti‑Money Laundering Directive (AMLD IV). The deal was reached following trialogue negotiations between the Council, the Parliament and the Commission. Under the revised Directive, Member States have to maintain central registers, listing the ultimate beneficial owners of corporate and other legal entities. The Directive also introduces changes to the rules for ‘politically exposed persons’.

The agreement now needs to be formally endorsed by the EU Member States’ ambassadors and by the ECON Committee and the Committee on Legal Affairs (JURI) in the Parliament. It will be subject to a plenary vote of the Parliament in March and once approved by ministers the revised Directive should be published in the Official Journal in Q2 2015.


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MARKETS IN FINANCIAL INSTRUMENTS DIRECTIVE AND REGULATION II

On 19 December, ESMA published technical advice on Delegated Acts for a number of the provisions under the revised MiFID II. The publication of the technical advice followed a consultation exercise in the summer of 2014. The Commission will now consider ESMA’s technical advice before presenting draft delegated acts.

In addition to the technical advice, ESMA has published a consultation on draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS). This follows on from the discussion paper published in the summer. ESMA is now inviting responses from the industry on 245 questions contained in the consultation paper. The most significant sections concern trading, transparency and transaction reporting. However, investor protection and governance issues are also covered.

Notably, in its technical advice, ESMA has backed down on proposals for the full unbundling of costs for research. It proposes, instead that these can still be paid for with dealing commissions under certain conditions, such as increased transparency around costs.

ESMA’s final technical advice also introduces greater flexibility around the payment of inducements to non‑independent advisers. It lists ‘a wider number of positive situations justifying the receipt of inducements’ than was included in the May 2014 consultation paper. ESMA advises the Commission to introduce a non‑exhaustive list of circumstances and situations to help NCAs to determine whether inducements are justified.

Understanding fully the implications of the requirements contained in the technical advice and responding appropriately to the consultation paper, represent serious challenges for the financial services industry. Responses to the consultation paper are due by 2 March and State Street will be responding. ESMA is required to submit the final RTS to the Commission in July 2015 and the final ITS in December 2015. Member States are required to transpose MiFID II into national law by July 2016, and the majority of MiFID II provisions will apply by January 2017.


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SINGLE RESOLUTION MECHANISM CONTRIBUTIONS

After lengthy negotiations, the Economic and Financial Affairs (ECOFIN) Council of finance ministers agreed in December to a complex formula for the calculation of Eurozone banks’ contributions to the Single Resolution Fund (SRF). The SRF is a central feature of the SSM. The fund ensures that troubled banks can continue to operate, in the medium term, while they are being restructured.

Member States agreed on a means for calculating the amounts due. This is based on the contributions to national banking sectors and will be phased in gradually. This means that the contributions of larger and riskier banking sectors will gradually rise between 2016 and 2024. The political consensus was possible, due to an agreement that contributions raised for national resolution funds in 2015 will be deducted from the amounts due to the SRF. The Council adopted the Implementing Act by Written Procedure at the end of 2014.

Additionally, a Delegated Regulation on contributions towards the administrative expenditure for the Single Resolution Board was published in the Official Journal (OJ) in December. The Delegated Regulation covers entities within the scope of the Single Resolution Mechanism (SRM) during the initial period of the Single Resolution Board’s existence from 1 January 2015 until 31 December 2015, or up until the entry into force of the final system adopted by the EU Council. The Delegated Act entered into force on 11 December 2014.


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BANKING RECOVERY AND RESOLUTION DIRECTIVE CONSULTATION

The BRRD creates a resolution regime in the EU for allowing authorities to deal with failing institutions in a common way. A key element underpinning the BRRD is the concept of Minimum Requirements for own Funds and Eligible Liabilities (MREL). The aim is to ensure that banks have an adequate stock of liabilities to cover losses and meet recapitalisation requirements. In order to stop entities structuring their liabilities in a way that impedes resolution arrangements, the BRRD requires institutions to hold a minimum level of MREL.

In November, the European Banking Authority (EBA) released a consultation on draft RTS.This addresses the issue of convergence across Member States. It seeks to specify the minimum criteria needed to achieve an appropriate degree and similar levels of MREL for institutions with similar risk profiles, resolvability, and other characteristics, regardless of their domicile.

The EBA is seeking to use these RTS as a means of aligning MREL with the Total Loss‑Absorbing Capacity (TLAC) framework, proposed for global systemic banks by the Financial Stability Board (FSB) and endorsed by the G20 in November. However, it is unclear to what extent aligning the two will be practically possible, given that there are significant differences. Further to this, a recent letter from Lord Hill to EU First Vice‑President Timmermans, has highlighted that the Commission intends to carry out a review of MREL in 2016, with a view to introducing changes as a result of the FSB TLAC proposals.


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DERIVATIVES/EUROPEAN MARKET INFRASTRUCTURE REGULATION

QUALIFYING CENTRAL COUNTERPARTY EXTENSIONIn December, the Commission adopted an Implementing Act, allowing for the further extension of the transitional period for capital requirements for EU banking groups’ exposure to CCPs under the Capital Requirements Regulation (CRR). Under the CRR, the Commission can adopt measures to extend the transitional period for the own funds requirements set out in the CRR and for the transitional period for reporting the initial margin, set out in the EMIR, by a period of six months, in ‘exceptional circumstances, where it is necessary and proportionate to avoid disruption to international financial markets’.

The extended transition period is necessary, due to the lack of progress in negotiations between the EU and the US in relation to equivalence arrangements under EMIR. The implementing act entered into force on 1 January 2015 and the transition period runs until 15 June 2015.

IRS CLEARING OBLIGATION LETTEROn 19 December, ESMA published a letter from the Commission relating to ESMA’s draft RTS on the clearing obligation for Interest Rate Swaps (IRS). The Commission has decided to amend the RTS to reflect industry concerns. These concerns relate to the proposed frontloading timeframe. In particular, the Commission considers the proposal by ESMA to apply the frontloading requirement from the application of the RTS in the OJ problematic. The proposal would mean that counterparties would not know which of the contracts they had entered into were subject to it and could not implement all necessary arrangements for frontloading to take place. This is a particular concern for intragroup transactions between Category 1 counterparties, which benefit from the exemption from the clearing obligation.

The Commission now proposes that the start date of frontloading requirements for Category 1 be postponed by two months, and for Category 2 by five months from the entry into force of the RTS. Further to this, the Commission intends to clarify the calculation of the threshold for investment funds and exclude non‑EU intragroup transactions from the scope of the clearing obligation.


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DERIVATIVES/ EUROPEAN MARKET INFRASTRUCTURE REGULATION (CONTINUED)

In response to the Commission’s notification that it intends to amend the draft RTS, ESMA published an opinion on 30 January that highlights its support for the Commission’s decision to postpone the start of the frontloading requirements for Category 1 and Category 2. However, ESMA also raised concerns relating to the suggested process to exempt non‑EU intragroup transactions from the clearing obligation and says it is ready to provide technical advice to find an alternative solution. It is now up to the Commission to decide if it will request further technical advice from ESMA on the process to exempt non‑EU intragroup transactions from the clearing obligation.

CDS DRAFT RTS SUBMISSION DELAYEDAt the end of November, ESMA published a letter highlighting that it had finished its work on the draft RTS for the clearing obligation for credit default swaps (CDS). However, ESMA said it would not submit the draft RTS to the Commission until it had assessed the IRS RTS, which was sent to the Commission on 1 October.

ESMA will publish the final draft RTS for CDS, once the Commission finalises its work on the IRS RTS.

NON‑DELIVERABLE FOREIGN‑EXCHANGE FORWARDSOn 4 February ESMA published a ‘feedback statement’ on the responses it received to its consultation paper on the clearing obligation under EMIR for non‑deliverable foreign‑exchange forwards (NDFs). Based on the feedback received to this consultation, ESMA is not proposing a clearing obligation on the NDF classes at this stage. ESMA says more time is needed to address the main concerns raised in the responses and believes it is difficult to evaluate at this stage the amount of time needed to address those issues.

The main concerns cited by ESMA include:

■■ The timing for the entry into force of a potential clearing obligation for NDF FX and its link with CCPs available to clear NDF

■■ The experience of CCPs and counterparties with NDF clearing

■■ The importance of international consistency in the implementation schedule of the clearing obligation.

ESMA highlights that their decision not to propose a clearing obligation for FX NDFs at this stage is ‘without prejudice to the possibility for ESMA to propose a clearing obligation on the NDF classes (by the submission of a final report to the European Commission including a draft RTS) at a later point in time to take into account further market developments’.

http://www.esma.europa.eu/system/files/2015-223_opinion_on_draft_rts_on_the_clearing_obligation.pdf

http://www.esma.europa.eu/system/files/2015-esma-234_-_feedback_statement_on_the_clearing_obligation_of_non_deliverable_forward.pdf

http://www.esma.europa.eu/system/files/2015-esma-234_-_feedback_statement_on_the_clearing_obligation_of_non_deliverable_forward.pdf


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DERIVATIVES/ EUROPEAN MARKET INFRASTRUCTURE REGULATION (CONTINUED)

ESMA TRADE REPORTING CONSULTATIONIn November, ESMA published a paper relating to the revision of standards applying to the obligation of counterparties and CCPs to report to trade repositories, as set out under the EMIR.

In light of inconsistencies in the implementation of the standards and widespread shortcomings in reporting to trade repositories, ESMA has issued a regularly revised set of Q&As to improve the quality of reporting. ESMA is now proposing to change the Q&A into formal technical standards.

The deadline for responses to the consultation paper is 13 February 2015 and the Commission will have three months to endorse the RTS/ITS once ESMA has submitted them. State Street plans to respond to this consultation paper.


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UCITS V

Following public consultation, ESMA issued its technical advice to the European Commission on certain delegated acts required by the UCITS V Directive at the end of November 2014. The advice covered two of the delegated acts provided for in the Directive: insolvency protection of UCITS assets when delegating safekeeping to a third party, and independence requirements between the UCITS management company and the depositary.

ESMA proposes a number of measures to protect a UCITS’ assets from the risk of insolvency of a third party safekeeping delegate:

■■ Where the third party delegate is located outside the EU, the delegate or the depositary must verify, on an ongoing basis, that the local legislation and jurisprudence recognises the segregation of the UCITS’ assets from the proprietary assets of the delegate or the depositary. In the event of the insolvency of the delegate, the UCITS’ assets will not be available to the creditors of the delegate

■■ The third party delegate must maintain precise, accurate and up‑to‑date records of all of a UCITS’ assets, so that an audit trail can be established and must provide a regular statement of assets to each depositary

■■ The third party delegate must maintain appropriate arrangements to minimise the risk of the loss or misuse of UCITS’ assets, paying particular regard to arrangements which allow the reuse of those assets

■■ The depositary must consider a minimum set of criteria when appointing a delegate. These should include local legal requirements and market practices for safekeeping, and the delegate’s financial condition, expertise and regulatory status

■■ The depositary’s contract with the third party delegate must provide for the possible termination of the arrangement.

ESMA also advises that, in situations where the requested level of protection from third party claims can no longer be guaranteed, there is an obligation on the UCITS’ management company, on receipt of the information from the depositary, to notify its NCA of such information immediately and take the appropriate measures in relation to the relevant assets of the UCITS, including their disposal, taking into account the need to act in the best interest of the UCITS and the investors of the UCITS.

In relation to the independence between the depositary and the management company, ESMA decided not to pursue the option in its consultation, which would have required the strict separation of the two, given the important restructuring and other costs that this would imply for the industry. Instead, ESMA’s advice to the Commission allows the management company and depositary to be in the same economic group, provided that there are certain protections in place around conflicts of interest. ESMA further recommends that:

■■ The management company/investment company shall demonstrate to its competent authority that it is satisfied that the appointment of the depositary is in the sole interests of the UCITS and the investors of the UCITS, in particular by comparing the relative merits of appointing the depositary versus another depositary, which is not linked

■■ The link between the management company/investment company and the depositary shall be disclosed to investors.

There is also a requirement for the management company and depositary to have at least the lesser of one third or two independent directors.


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UCITS SHARE CLASS DISCUSSION PAPER

On 23 December 2014, ESMA issued a Discussion Paper on UCITS share classes. The paper was issued as a result of ESMA identifying diverging practices across the EU in relation to what a UCITS is permitted to do at a share class level. ESMA intends to use the responses to the Paper to develop a common understanding across the different jurisdictions and foster a harmonised approach to UCITS share classes. ESMA has identified the following principles that should be used in assessing the legality of different share classes:

■■ Share classes of the same UCITS should have the same investment strategy

■■ Features that are specific to one share class should not have a potential (or actual) adverse impact on other share classes of the same UCITS

■■ Differences between share classes of the same UCITS should be disclosed to investors when they have a choice between two or more classes.

ESMA goes on to identify types of share classes which, in its opinion, would comply with these principles and some share class structures which, it believes, would not. The Paper is open to responses until 27 March.


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ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE

ESMA CONSULTS ON AIFMD PASSPORT AND THIRD COUNTRY AIFMS

Article 67 of the AIFMD tasks ESMA with issuing an opinion to the EU legislative institutions on the functioning of the Alternative Investment Fund Manager (AIFM) passport, and of the National Private Placement Regimes (NPPR) applicable to the marketing of non‑EU Alternative Investment Funds (AIFs) of EU AIFMs and of AIFs of non‑EU AIFMs.

The opinion will form the basis for the decision to extend the availability of the passport for the activities subject to NPPR. On 7 November 2014, ESMA issued a Call for Evidence to receive feedback from industry participants on those items referenced in Article 67.

In order to issue positive advice on the extension of the passport, ESMA must find that: ‘no significant obstacles regarding investor protection, market disruption, competition and the monitoring of systemic risk’ exist to impede either the application of the passport to the marketing of non‑EU AIFs by EU AIFMs in the Member States, or the management and/or marketing of AIFs by non‑EU AIFMs in the Member States.

ESMA has stated that it will take into account issues related to:

■■ Investor protection and the smooth cooperation between the EU and the non‑EU authorities

■■ The risk of market disruption and distortion of competition that would put the EU fund industry at a disadvantage vis‑a‑vis the fund industry of non‑EU countries

■■ The ability to monitor systemic risk.

The Call for Evidence closed on 8 January and State Street submitted a response.


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ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (CONTINUED)

ESMA CONSULTATION PAPER ON THE AIFMD ASSET SEGREGATION REQUIREMENTSOn 1 December 2014, ESMA published a consultation on asset segregation under the AIFMD for consultation. Specifically, ESMA focused on the segregation requirements when delegating safekeeping to a third party. In its consultation, ESMA considers that the segregation requirement under the AIFMD implies that the third party has to distinguish assets of AIF clients from its own assets, the assets of any other client of the third party, the assets belonging to the depositary itself, or finally the assets belonging to clients of the depositary which are not AIFs.

ESMA concludes that the account where the AIF’s assets are to be kept at the level of the delegated third party can only comprise assets of the AIF for which the safe‑keeping has been delegated to the third party and assets of other AIFs. Non‑AIF assets cannot be included in such an account.

However, according to ESMA, it is unclear whether the assets which can be held in such an account are only those coming from the same delegating depositary or, alternatively, whether the omnibus account can hold assets for AIF clients coming from different delegating depositaries. ESMA proposed two options:

■■ The account in which the AIF’s assets are to be kept by the delegated third party may only comprise assets of the AIF and assets of other AIFs of the same delegating depositary. Assets of AIFs of other depositaries would be considered as assets of the third party’s ‘other clients’

■■ A delegated third party holding assets for multiple depositary clients would not be required to have separate accounts for the AIF assets of each of the delegating depositaries.

The consultation closed for responses on 30 January.


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CENTRAL SECURITIES DEPOSITORIES

ESMA has launched a package of three consultations on proposed technical standards, technical advice and guidelines implementing the CSD Regulation. These follow the Discussion Paper on technical standards under the CSD Regulation that ESMA published on 20 March 2014.

The CSD Regulation was published in the OJ on 28 August 2014 and came into force on 17 September 2014. According to the Level 1 provisions, ESMA has to submit draft RTS and Technical Advice to the Commission by 18 June 2015.

REGULATORY TECHNICAL STANDARDSThe first consultation paper includes draft RTS on:

■■ Settlement discipline measures

■■ The authorisation/recognition/supervision of CSDs

■■ Organisational and prudential requirements for CSDs

■■ Access requirements (between a CSD and its participants, by issuers to CSDs, between CSDs, and between CSDs and other market infrastructures)

■■ Internalised settlement reporting which covers securities transactions settled outside a securities settlement system.

TECHNICAL ADVICEThe second consultation paper includes draft technical advice on proposed penalties for settlement fails and also arrangements to identify CSDs of substantial importance for the functioning of the securities markets and the protection of the investors in host Member States. The proposed level of penalties is based on average borrowing costs for the relevant securities. ESMA’s advice proposes indicators to assess the substantial importance, based on the core services offered by a CSD.

GUIDELINESThe third consultation paper consists of draft guidelines on access to a CCP or a trading venue by a CSD. The consultation covers the risks to be taken into account by a CCP or a trading venue when carrying out a comprehensive risk assessment, following a request for access by a CSD, or when the NCA of the CCP, or the NCA of the trading venue, assesses the reasons for refusal to grant access to a CSD by the CCP, or by the trading venue.

The deadline for responses to all three consultations is 19 February 2015 and ESMA has to submit the final RTS to the Commission by 18 June 2015. State Street is responding to the consultations.


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PACKAGED RETAIL AND INSURANCE‑BASED INVESTMENT PRODUCTS

In December, the Regulation on Key Information Documents for PRIIPs was published in the OJ.

The Regulation introduces a mandatory disclosure document (KID), which must be provided to investors in retail investments prior to investment. Under the Regulation, investment funds, insurance investment products (such as unit‑linked or with‑profits policies) and structured products will all be classed as Packaged Retail Investment and Insurance Products. They will all be subject to the KID requirements. UCITS products are granted a five‑year transitional period under the Regulation.

In November, the three European Supervisory Authorities (ESAs) published a Discussion Paper, which looks at possible content options for the KID, with a specific focus on how cost, risk and performance scenarios could be disclosed. State Street is responding to the consultation.

This Discussion Paper is an initial step in the preparation of draft RTS. The eventual RTS will contain detailed rules for the KID. These will include a summary risk indicator, performance scenarios and cost disclosures. The RTS will also address measures on the revision, review and re‑publication of the KID, and on the timing of delivery of the KID to the retail investor.

The Regulation came into force on 29 December 2014 and will apply from 31 December 2016.


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MONEY MARKET FUNDS REGULATION

Despite the Money Market Fund (MMF) Regulation being identified as a priority during the Italian Presidency of the EU, an agreed position was not reached on it within the Council despite numerous compromise proposals being circulated by the Italian EU Presidency and other EU Member States. Amendments were also proposed to a number of other areas, including the list of eligible investments and the diversification limits. The task of achieving consensus in the Council will now fall to Latvia, which assumed the presidency from 1 January 2015, though Latvia has not identified the MMF Regulation as a priority at least for the first half of its Presidency.

In the EU Parliament, the Economic and Monetary Affairs (ECON) Committee recommenced work on the MMF dossier under the direction of the newly appointed rapporteur, Neena Gill. Ms Gill has set out her intentions on how she will deal with the proposed Regulation. She plans to consult with all interested stakeholders and, to that end, she hosted an initial roundtable event on 4 November 2014.

Following the roundtable, Ms Gill issued a first draft report on the MMF Regulation and presented it to the ECON Committee on 1 December 2014. Her suggestions include the potential for CNAV MMFs to continue to exist without the need for a capital buffer, if they are marketed solely to retail investors, including charities and local authorities. She also proposed a CNAV option for MMFs which invest at least 80% of their net asset value in EU public debt, with the stipulation that the remainder of the portfolio would be subject to a risk‑weighted capital buffer, depending on the nature of the assets held. The text also proposes an increase to the daily and weekly liquidity requirements for CNAV MMFs, as well as the imposition of liquidity fees and gates, should these levels not be met. Amendments to the report were submitted by other Members of the European Parliament (MEPs) by 8 January.

While the timetable for the progress of the MMF Regulation within ECON has moved since the rapporteur’s initial announcements, a plenary vote on the draft legislation in the EU Parliament is still scheduled for March. In the meantime, a number of parliamentary groups have successfully called for the EU Parliament’s research unit to conduct a more in‑depth impact assessment on the potential implications of this legislative initiative on the real economy, which is expected to be completed towards the end of February.


EURO

PE

BANK STRUCTURAL REFORM

In January 2014, the Commission published a proposed regulation on structural measures improving the resilience of EU credit institutions. The proposal aims to address the potential systemic risk posed by large banking groups within the EU, by prohibiting proprietary trading and allowing for the separation of certain risky trading activities, following assessment by an NCA and subject to certain metrics being exceeded.

The proposed regulation is currently going through the legislative process. The EU Parliament ECON Committee published its draft report by the rapporteur, Gunnar Hömark in January.

The report significantly amends the original proposal by introducing a risk‑based, rather than a size‑based approach to identifying in‑scope entities. The report also grants supervisors the discretion to take alternative measures, in the form of enhanced supervision or prudential measures, instead of mandatory separation.

Controversially, the report also completely deletes the proposed derogation, aimed at the UK, based on its Vickers reforms. However, it rewords a recital stating that banks which are subject to a supervisory assessment under equivalent national legislation would not be subject to an additional assessment.

The Council has yet to form a position. It is likely to be some time before it is able to do so. If agreement can be reached on the proposed regulation, it is not expected until late 2015 or 2016.

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014PC0043&from=EN

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014PC0043&from=EN


EURO

PE

BENCHMARKS

The Latvian presidency of the Council has gained agreement amongst Member States on the proposal for a regulation on indices used as benchmarks in financial instruments and financial contracts.

Following the London Interbank Offered Rate (LIBOR) scandal, the EU is attempting to introduce a new regulation, governing the authorisation, supervision and governance of financial benchmarks. The Regulation seeks to prohibit the use of unauthorised benchmarks in the EU and requires benchmarks administrators to have authorisation from their NCA. The Regulation also proposes that financial institutions must contribute data to ‘critical’ benchmarks. The Regulation also provides for an equivalence regime, to be administered by ESMA, for third country administered benchmarks.

In the EU Parliament the rapporteur, Cora Van Nieuwenhuizen, has published her draft report for consideration by the ECON Committee. The Committee will vote on it in March.

The Regulation is expected to be finalised in mid‑2015.

EUROPEAN LONG‑TERM INVESTMENT FUNDS

In December, political agreement was reached on the European Long‑Term Investment Funds (ELTIF) Regulation. The proposed Regulation aims to create a new type of investment fund sector, designed to harness investor appetite for long‑term investment in infrastructure and firms. ELTIFs form a central part of the Commission’s long‑term financing legislation and are likely to be a key aspect of the Commission’s Capital Markets Union initiative.

The Council is due to adopt the Regulation as soon as the text has been finalised in all languages.


EURO

PE

THE REPORTING AND TRANSPARENCY OF SECURITIES FINANCING TRANSACTIONS

At the start of 2014, the Commission published a proposed Regulation on the reporting and transparency of Securities Financing Transactions (SFTs).

This proposal will apply to both financial and non‑financial counterparties to securities financing transactions, as well as to the parties to rehypothecation arrangements. Under the Commission proposal, all securities financing transactions must be reported to a trade repository and written consent must be obtained, prior to any transaction which involves ‘rehypothecation’ of assets. In addition, managers of UCITS and AIFs have extra investor disclosure obligations relating to securities financing transactions.

The Italian Presidency managed to form a general approach on the proposal, once disagreements around the scope of the regulation and the exemption of transactions, where a member of the European System of Central Banks (ESCB) is a counterparty, were resolved.

The EU Parliament is currently considering the proposal and the rapporteur, Renato Soru has published his draft report. The report is more ambitious than the Commission proposal. The stated aim of the rapporteur is that: “this regulation should aim at making the European Union compliant with the FSB’s Recommendations on SFTs by the end of 2017”.

In order to achieve this, the rapporteur has proposed amendments to the conditions for re‑use of collateral; an obligation for counterparties to use a common methodology for haircuts applicable to collateral in certain types of SFTs; and mandatory minimum haircuts on certain SFTs, to be developed by the Commission in the form of RTS.

The proposed Regulation is likely to be finalised this year, with the majority of provisions applying 18 months later.

http://ec.europa.eu/internal_market/finances/docs/shadow-banking/140129_proposal_en.pdf


EURO

PE

INSTITUTIONS FOR OCCUPATIONAL RETIREMENT PROVISION

The Council has formed a General Approach on the proposed revision of the Institutions for Occupational Retirement Provision (IORP II).The Council text contains clarification on what is considered to be a registered or authorised IORP as well as a provision noting that specificities of national social and labour laws are to be respected in relation to cross‑border activities of pension funds. In addition, instead of a single depositary, the Council General Approach text states that IORPs can appoint one or more depositaries for safe‑keeping of assets and oversight duties. Members States may exempt institutions from the requirement to appoint a depositary if all the pension scheme assets are invested in UCITS/AIFMD products. Additionally, a Member State may exempt an institution if an equivalent level of protection, as outlined in the revised Directive, is in place ‑ though this exemption cannot apply to institutions which carry out cross‑border activity.

The IORP Directive aims to create a prudential framework for pension funds, based on minimum harmonisation and mutual recognition. The aim is to enable the establishment of pan‑European pension funds to manage the pension schemes of employees in different Member States.

The proposed revision of the Directive focuses on the following areas:

■■ Remuneration: The review imposes stricter rules on sound remuneration and the disclosure of remuneration policies

■■ Depositary requirement: A depositary is mandatory for IORPs whose members fully bear the investment risk (i.e. Defined Contribution schemes). This ensures that Member States cannot restrict IORPs from appointing a depositary located in other Member States

■■ Depositary liability: Similar to the AIFMD and UCITS V, the depositary is liable for losses suffered from a depositary’s failure to act

■■ Transparency: Funds are obliged to provide Pension Benefit Statements (PBS), as well as certain information to prospective members and beneficiaries before and during their retirement. Funds must send their members a PBS at least once a year. The PBS must be comprehensible and be at most two pages.

IORP II was widely rumoured to be dropped by the new Commission. It appears that forming a general approach was a way of preventing this happening. This does not however mean that serious disagreements between Members States have been resolved.

The European Parliament is expected to begin its consideration of the revised Directive in early 2015 and political agreement is not expected, if at all, until late spring 2015.


CHAN

NEL

ISLA

NDS

OFFSHORE LONDON LISTED FUNDS – TAX AND FINANCIAL REPORTING UPDATES

The Channel Islands and, in particular, Guernsey have traditionally enjoyed strong growth as the domicile of choice for offshore investment trust structures. With strong technical knowledge – a ‘must have’ for this type of offering – and with both islands still enjoying strong growth over the recent Initial Public Offering (IPO) window, this is probably an ideal time to highlight two of the more substantial technical changes likely to impact on the running of such structures.

UK TAXAs part of the 2013 UK investment management strategy, the UK Government extended the provisions within S363A Taxation (International and Other Provisions) Act 2010 (TIOPA) to cover ‘qualifying’ AIF as well as UCITS funds. A qualifying AIF will not be treated as a tax resident in the UK, regardless of whether its central management and control is exercised from the UK.

UK Value Added Tax (VAT) issues may arise if the AIF is treated as ‘belonging in the UK’. This would mean supplies made to the AIF (such as management services) may be subject to UK VAT. This would be an irrecoverable cost to the Fund.

Tax advisors are suggesting that it is still prudent for non‑UK AIFs to establish central management and control processes offshore. However, the occasional company board meeting or dialling in from the UK for board meetings is now acceptable. This creates much greater flexibility for non‑UK AIFs.


CHAN

NEL

ISLA

NDS

OFFSHORE LONDON LISTED FUNDS – TAX AND FINANCIAL REPORTING UPDATES (CONTINUED)

ACCOUNTING/CORPORATE GOVERNANCEUpdates to the Financial Reporting Council (FRC) UK Code on corporate governance and subsequent updates to industry body guidance, such as the Association of Investment Companies (AIC) Code in 2013, mean that there have been significant changes to the front end of accounts over 2014. Further changes can be expected in 2015, as all of the latest changes, applying from October 2014 reporting periods, start to take effect. Changes expected for reporting periods after 1 October 2014 include:

Principal Risk and Monitoring

Directors will now need to confirm that they have undertaken robust assessments of risk and provide details on how those risks are mitigated. They will also need to monitor risk on an ongoing basis, rather than annually, as is currently the norm. This will probably mean more detailed risk reviews and more frequent meetings of any established risk or audit committee.

Going Concern and Viability

To meet the needs of the Company and its investors, Directors will now give two statements: one on the ‘going concern’ of the Company, on an accounts basis and the other on the future viability of the Company, over a term longer than one year. There is some speculation as to what this longer term statement will contain. However, it is expected that precedents will be established over the next few months.

REVIEWWhile it is likely there will be a move by offshore Fund Boards to start cautiously using Board rooms in Canary Wharf and Bishopsgate, as well as St Peter Port and St Helier, it is likely that the Audit Committees will want to stay close to their accountants and Company Secretaries, as they digest this latest set of changes.


CHAN

NEL

ISLA

NDS

CHANGES TO UK GAAP – IMPACT ON FINANCIAL COMMUNITY

It is important that the financial community take time to consider phrases such as ‘international harmonisation,’ ’regulatory alignment,’ or ‘amendments to accounting standards’. The change to the UK Generally Accepted Accounting Practice (GAAP), which applies to accounting periods from 1 January 2015, is very significant and weighing heavily on many people. The following sections outline the potential impacts of this change.

ALIGNING REPORTING STANDARDSThe current package of UK accounting standards known as UK GAAP runs to thirty Financial Reporting Standards (FRS) and ten Statements of Standard Accounting Practice (SSAP). This makes reporting very onerous. It is planned to reduce this list, leading to a more streamlined sets of FRSs (there are currently four in issue – FRS 100‑103), which align better with International Financial Reporting Standards (IFRSs) and the current regulatory environment.

Within the private equity arena, the changes will have an impact. Many entities elect to use UK GAAP and/or the Investment Management Association’s Statement of Recommended Practice (IMA SORP), which has been reissued in light of new UK GAAP. Updates that will be welcomed include an exemption from a cash flow statement, the heavier use of fair value for assets and tailored disclosures for financial instruments.

DISCLOSURE REQUIREMENTSAside from a significant reduction in the volume of information, new UK GAAP is aiming to reduce the current suite of complex standards and to ultimately improve the usability of financial statements. Rather than taking the traditional approach of simply adding further wordy disclosure notes and incomprehensible numbers, (as in, for example, the required sensitivity analyses under IFRS), new UK GAAP is in place to support international standards and UK regulations, for example by allowing reduced disclosures (FRS 101) or certain disclosure exemptions under FRS 102.

IMPACT ON STATEMENTSIf the changes to UK GAAP affect you or your clients, the main things to consider are:

■■ Ensure that you prepare draft accounts well in advance of your 2015 year end

■■ Take care over the comparative periods, as restatement may be required

■■ Where necessary, communicate with the client in order to explain the changes.

Ultimately, the new UK GAAP offers flexibility to relevant entities – for example in the application of certain elements of IFRS, or the disclosure of certain information. This approach should work well, given the variable nature of private equity entities.

A summary of the new standards

Standard and title Explanation Applicable to?

FRS 100 – Application of financial reporting requirements

Explanation standard outlining how and when to apply new UK GAAP

All entities (as guidance)

FRS 101 – Reduced disclosure framework

A smaller UK GAAP for ‘qualifying entities’ Entities who have a listed parent or are consolidated into group financial statements

FRS 102 – FRS applicable in the UK and Ireland

The main standard, derived from IFRS for SMEs*

All other entities

FRS 103 – Insurance contracts The only specific standard currently in operation for recognition, measurement and disclosure of insurance contracts

Entities with insurance contracts (supplementary to FRS 102)

*IFRS for Small and Medium Sized Enterprises


FRAN

CE

INTERNAL CONTROL SUBJECT TO THE FRENCH REGULATOR

The French banking and financial regulatory committee, Comité de la Réglementation Bancaire et Financière (CRBF) Regulation 97‑02 of 21 February 1997 was replaced by the Order of 3 November 2014 on the internal control of credit institutions and investment firms, subject to the Autorité de Contrôle Prudentiel et de Résolution (ACPR), the French Regulator.

This Order is not really innovative (in the sense that its main provisions were known to French law), but it has the merit of forming a coherent whole in a single device. It incorporates the major axes of implementation of CRD IV, in terms of organisation and internal control. The main changes relate to the following topics:

■■ Governance: Article 104 obliges institutions, whose balance sheet size exceeds five billion euros, to set up three committees: a Risk Committee, a Nomination Committee and a Remuneration Committee. The duties on risk control, formerly entrusted to the Audit Committee, are now entrusted to the Risk Committee. The communication of information on the internal control system (permanent periodic inspection and compliance) is now made to the Risk Committee. The supervisory body and, if necessary, the specialised committees, determine the nature, volume, form and frequency of information transmitted. The supervisory body is required to review regularly, with the assistance of the Risk Committee, the policies put in place to comply with the Order; to evaluate the effectiveness of the internal systems and procedures; and to take any necessary corrective action

■■ Liquidity risk: Many of these provisions were already included in the order of 5 May 2009, which dealt with the identification,

measurement, management and control of liquidity risk. The main additions aim to clarify and strengthen the expectations of the ACPR in this field

■■ Remuneration: This policy has been strengthened, in order to reduce remuneration as a factor of negative risk. The Order mainly covers the dispositions of Paragraph III, listed in Article L511.57 of the French Monetary Code. The first objective is to clearly define the employees falling within the scope of this regulation. The second objective is to set a framework for a remuneration policy

■■ Risk of excessive leverage: Articles 211 to 213 of the Order set out new requirements in relation to the risk of vulnerability of a bank, resulting from excessive leverage. Institutions should have policies and processes to identify, manage and monitor this risk. The indicators used to assess this risk will include the leverage ratio and asymmetries between assets and liabilities. These provisions do not apply to financing companies

■■ The scope of risks to be monitored by credit institutions and investment firms includes counterparty risk, residual risk, concentration risk, basis risk, securitisation risk, risk of excessive leverage and systemic risks

■■ Credit risk and Market risk: Institutions are required to have internal methods of credit risk assessment for all exposures such as loans, securities or securitisation. These methods should not rely solely or automatically on external credit rating systems. In particular, when capital requirements are based on external ratings, institutions must take into account other sources, in order to assess the internal capital allocation. With regard to market risk, the Order now explicitly obliges institutions to have policy and detection processes in place, in order to measure and manage all the causes and effects of market risks. Such policies must include tolerance thresholds on liquidity risk.


FRAN

CE

CAPITAL BUFFERS OF BANKING PROVIDERS AND INVESTMENT COMPANIES

In 2013, the EU adopted a legislative package to strengthen the regulation of the banking sector and to implement the Basel III agreement in the EU legal framework. The new package replaces the current Capital Requirements Directives (2006/48 and 2006/49) with a Directive and a Regulation. This is a major step towards creating a sounder and safer financial system. The fourth Capital Requirements Directive (CRD IV) (Articles 128 to 142) has been transposed into French law, through the Order of 3 November 2014 on capital buffers of banking providers and investment companies, other than portfolio management companies.

The five capital buffers which have been introduced by this decree are:

Capital conservation buffer

A capital conservation buffer of 2.5%, comprised of Common Equity Tier 1 (CET 1), is established above the regulatory minimum capital requirement. This requirement will enter into force progressively, starting on 1 January 2016 following the schedule below:

2016 2017 2018 2019

0.625% 1.25% 1.875% 2.5%

It is worth noting that the calculation of capital conservation buffer is required on an individual and consolidated basis.

Countercyclical capital buffer

The countercyclical buffer rate will vary between 0% and 2.5% of risk weighted assets. It can be greater than 2.5% and its calculation is required on an individual and on a consolidated basis.

The countercyclical buffer rate is the rate that reporting institutions must apply to calculate their specific countercyclical capital buffer. It is set by the High Council for Financial Stability or, where appropriate, by another state authority. If the rate of countercyclical buffer is set by an authority other than the High Council for Financial Stability, it does not apply to financial companies, unless otherwise decided by the High Council for Financial Stability.


FRAN

CE

CAPITAL BUFFERS OF BANKING PROVIDERS AND INVESTMENT COMPANIES (CONTINUED)

When the High Council for Financial Stability fixes a countercyclical buffer rate above zero for the first time, or when, later, it increases the rate up until then in force, reporting institutions must apply that rate for the calculation of their own specific countercyclical buffer capital within twelve months of the publication date.

The High Council for Financial Stability publishes its countercyclical buffer rate in the French Official Journal, and on its website.

This requirement will enter into force progressively, starting 1 January 2016, following the schedule bellow:

2016 2017 2018 2019

0.625% 1.25% 1.875% 2.5%

Buffers for global systemically important institutions (G-SIIs) and or other systemically important institutions (O-SIIs)

Buffers will apply on a consolidated basis for G‑SIIs and/or on an individual, sub‑consolidated basis for O‑SIIs. The O‑SII buffer will be capped at 2%.

G‑SIIs will be assigned by ACPR to one of five sub‑categories, depending on their systemic importance. They will be subject to progressive additional CET 1 capital requirements, ranging from 1% to 2.5% for the first four groups. A buffer of 3.5% will apply to the highest sub‑category.

The systemic risk buffer and buffers for G‑SIIs and O‑SIIs will generally not be cumulative. Only the highest of the three buffers will apply.

ACPR publishes and notifies the Commission, the European Systemic Risk Board (ESRB) and the EBA on the list of O‑SIIs, G‑SIIs and the sub‑category to which they are assigned.

Systemic risk buffer

The High Council for Financial Stability may require a systemic risk buffer. This requirement may be at least equal to 1% of CET 1 capital requirements (in addition to the solvency ratio and the requirements for other buffers). It can be up to 5%. This buffer may be applied on an individual or a consolidated basis.

The High Council for Financial Stability publishes its systemic risk buffer rate in the French Official Journal, and on its website.


GERM

ANY

ACT ON DECREASING THE DEPENDENCY ON RATINGS

On 18 December 2014, the Act on Decreasing the Dependency on Ratings was published in the Federal Law Gazette.

The Act will introduce the following, inter alia:

■■ The Act expands the provisions on administrative fines in the Securities Trading Act (WpHG), Banking Act (KWG) and Capital Investment Code (KAGB) and sanctions individuals and institutions who fail to meet the requirements relating to the use of ratings according to the Credit Rating Agency Regulation (CRA I)

■■ An automatic or exclusive use of ratings for assessing the credit quality by management companies is now impossible, according to Section 29 (2a) of KAGB, and a firm’s risk management systems have to safeguard against this

■■ According to the new Section 1a (3) of KWG, institutions and financial services institutions, which are not CRR‑institutions, are now presumed to be CRR‑institutions, in light of the application of the CRA I, insofar as they use ratings for supervisory purposes.

The Act entered into force on 19 December 2014.

BANKING RECOVERY AND RESOLUTION DIRECTIVE IMPLEMENTATION ACT

On 18 December 2014, the BRRD Implementation Act was published in the Federal Law Gazette.

The Act implements the BRRD on the recovery and resolution planning and partly transfers the supervisory power from BaFin to ECB according to the SSM‑Regulation.

Recovery and resolution planning of institutions will be regulated in the new Recovery and Resolution Act (SAG). For institutions with the mother institutions in a third country which do not pose any potential danger to the system, simplified requirements will apply.

The Act entered into force on 1 January 2015.


IREL

AND

CENTRAL BANK OF IRELAND UPDATES AIFMD AND UCITS Q&AS

In November and December, the Central Bank of Ireland (CBI) issued further updates to its Q&As relating to the local application of AIFMD and UCITS.

In the AIFMD Q&A, the CBI clarifies that Annex IV reporting to it by non‑EU AIFMs must commence as soon as notification of an intention to market into Ireland is made. The obligation ends only once marketing activities cease and there are no Irish investors remaining in the fund. The AIFMD Q&A also includes a new section on loan originating Qualifying Investor Alternative Investment Funds (QIAIFs), following the introduction of this specific category of fund as a regulated Irish fund from 1 October 2014.

In its UCITS Q&A, the CBI added clarification that the prohibition on subscription and redemption charges on transactions between a Master and Feeder UCITS did not encompass a prohibition on anti‑dilution levies, provided that the fund documentation clearly provides for this. The Q&A further states that the CBI will only authorise any UCITS Exchange Traded Fund (ETF), including active ETFs, if there is daily transparency as to the make‑up of the portfolio.


IREL

AND

GARETH MURPHY ADDRESS TO IFIA UK SYMPOSIUM

The CBI’s Director of Markets Supervision, Gareth Murphy, addressed the second annual Irish Funds and Industry Association (IFIA) UK Symposium at the end of November 2014.

Mr. Murphy summarised the CBI’s position in relation to two recent consultations. In relation to the consultation on the CBI’s application of ESMA’s amended rules on collateral diversification, Mr. Murphy informed the audience that the final outcome would provide fund managers with a clear sense of the CBI’s expectations in relation to a UCITS’ collateral management process.

Mr. Murphy also referred to the CBI’s consultation on the effectiveness of fund management company oversight of delegates and explained how the CBI would use the feedback received, along with any findings from its themed supervisory work on Irish authorised AIFMs, in order to steer the CBI’s final approach on the matter.

In his speech, Mr. Murphy also spoke about the ongoing legislative initiatives at a European level and encouraged industry to continue to play a constructive role in the consultative process. He advised industry to frame its arguments in terms of how the industry’s activities are supporting the real economy.


ITAL

Y

CONSULTATION ON SOCIAL SECURITY INSTITUTIONS INVESTMENT LIMITS AND CONFLICT OF INTERESTS

On 14 November 2014, the Minister of Economy issued a Consultation document on: the scheme of regulation for the investment of financial resources of social security institutions; conflict of interests; and depositary.

The consultation document is aimed at defining the investment activity of the social security institutions, which are part of the first pillar of the Italian Pension System, in order to ensure adequate protection for investors whose participation in those entities is compulsory.

The proposed regulation introduces, amongst others, the following relevant changes to the social security institutions regime:

■■ Criteria and limits for investments

■■ Processes for the choice of asset managers

■■ Appointment of a depositary

■■ Formalisation of the investment strategy

■■ Management of potential conflicts of interests.

The appointment of a depositary was not required until now. The aim of the depositary is to perform the same activities and controls as for UCITS funds and AIFs, so industry’s response to the consultation is focused primarily on the discipline of the depositary.

In particular, the document reports the following considerations on the proposed regulation:

■■ It contains references to the old Paragraph 38, instead of the new Paragraphs 47, 48, 49 of the Consolidated Financial Law concerning the depositary regime, as activities and responsibilities

■■ It proposes generic formulations to identify the regulatory tasks of the depositary of the social security institutions, which are not in line with the liability regime, outlined by the Consolidated Financial Law for the depositary

■■ It does not provide adequate protections to allow the depositary to perform controls on investment, with an appropriate frequency

■■ It does not include obligations for the social security institutions to adopt their own policy for the evaluation of assets (to be shared with the asset managers and the depositary), in order to enable the latter to carry out the necessary controls.

For this reason, in the response to the consultation, State Street, through the Italian Banking Association (ABI), pointed out the need to supplement the rules, currently under consultation, with more detailed provisions, to be defined in accordance with Bank of Italy, Commissione di Vigilanza sui Fondi Pensione (COVIP, the Supervisory Commission of Italian Pension Funds) and depositaries, in order to define a more comprehensive and clear regime.


ITAL

Y

NEW DECREE ON PENSION FUND INVESTMENT LIMITS AND CONFLICT OF INTERESTS

The Ministerial Decree n. 166 of 2 September 2014 (the Decree 166/2014) by the Ministry of Finance was published on the Official Gazette website on 13 November.

The Decree replaces the previous Decree 703/96. It aims to regulate the investment criteria, based on a qualitative approach to investments, allowing for more flexibility for pension funds, but requiring adequate procedures and an organisational structure based on the dimension and complexity of the portfolio and the investment policy. Moreover, the Decree intends to provide a regulatory framework for conflicts of interest, based on the guidelines established in MiFID.

The Decree applies to all pension funds operating in Italy, with certain specific exclusions. Existing pension funds have 18 months to comply with the Decree.


ITAL

Y

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE

A further extension has been granted by the Italian Government to Depositaries and to Asset Managers. They have until 30 April 2015 to comply with AIFMD and to confirm compliance to the Bank of Italy.

The new regulatory framework has been recently published for information only on the websites of the Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB), but not yet formally issued and published in the Italian Official Journal. The entry into force date is still unknown. It includes:

■■ Bank of Italy Regulation on Collective Investment Schemes

■■ CONSOB Regulation implementing the provisions on Intermediaries – Regulation no. 16190/2007

■■ CONSOB Regulation implementing the provisions on Issuers – Regulation no. 11971/1999

■■ Bank of Italy – CONSOB Joint Regulation on the organization and intermediary procedures providing investment services or collective investment management services.


ITAL

Y

TAX INCREASE ON PENSION FUNDS AND PRIVATE SOCIAL SECURITY SCHEMES

The Italian Stability Law 2015 came into force on 1 January. It has increased the taxation of both Pension Funds and Private Social Security schemes.

In particular, the net result accrued by the Pension Fund for each fiscal year will be subject to a substitute tax of 20% (compared to 11% in the past), while Private Social Security schemes will be subject to a substitute tax of 26% (instead of 20%).

These tax increases will also affect the 2014 financial year. However, in order to avoid this increase affecting positions already defined, a mechanism to adjust the taxable base has been introduced. Clarifications on how the adjustment mechanism will work are awaited from regulators.


LUXE

MBO

URG

OPINION OF ESMA ON COMMON DEFINITION OF EUROPEAN MONEY MARKET FUNDS

The purpose of the Commission de Surveillance du Secteur Financier (CSSF) Circular 14/598 is to implement the amendments introduced by ESMA’s Opinion of 22 August 2014 (Ref.ESMA/2014/1103), concerning the Committee of European Securities Regulators (CESR) Guidelines on a Common Definition of European Money Market Funds (Ref.CESR/10‑049) in the Luxembourg regulations, governing undertakings for collective investment, subject to the law of 17 December 2010 and specialised investment funds, subject to the law of 13 February 2007.

ESMA’s opinion, or rather review and reconsideration of the former CESR guidelines on a common definition of European Money Markets Funds, was issued following the revision of the EU Regulation on Credit Agencies (CRA3 Regulation) and amends the former CESR guidelines, in view of the assessment of the credit quality of money market instruments by fund managers of short‑term money markets funds (ST MMFs) and MMFs, whereas ESMA followed the distinction made between ST MMFs and MMFs, which was introduced by the CESR guidelines.

IMMOBILISATION OF BEARER SHARES AND UNITS

In early January, the CSSF published a Frequently Asked Questions on investment funds established in Luxembourg (Version 1, 30 December 2014). The purpose of this document is to provide additional details on the provisions of the Law of 28 July 2014, regarding immobilisation of bearer shares and units and their interpretation.

In particular, clarifications are provided on the new depositary role and on the timeframe of the implementation of the different provisions of the law.


LUXE

MBO

URG

ESMA GUIDELINES ON ETFS AND OTHER UCITS ISSUES

On 30 September 2014, the CSSF published Circular 14/592, implementing into Luxembourg’s regulatory framework the revised guidelines issued by the ESMA on 1 August 2014 on ETFs and other UCITS issues for regulators and UCITS management companies. The changes took effect on 1 October 2014.

The Circular, which supersedes CSSF Circular 13/559, applies to UCITS (those subject to Part I of Luxembourg’s investment funds law of December 17, 2010) and to individuals involved in their operation and supervision.

The new guidelines provide for a derogation from the rules that limit the maximum exposure of a basket of collateral to a given issuer to 20% of the UCITS’ net asset value.

The requirement for sufficient diversification of issuer concentration is now deemed to be respected, if the UCITS receives a basket of collateral, whose maximum exposure to a single issuer is 20% of the fund’s Net Asset Value (NAV) from a counterparty with which it is undertaking efficient portfolio management and over‑the‑counter derivative transactions.

When a UCITS is exposed to different counterparties, the various baskets of collateral must be aggregated to measure compliance with the 20% single issuer limit. However, as a derogation, the fund may be fully collateralised with different securities and money market instruments, issued or guaranteed by: an EU Member State; one or more local authorities; a third country; or a public international body to which at least one Member State belongs.

In this case, the UCITS should receive securities from at least six different issues, and securities of any single issue should not account for more than 30% of its NAV. Funds that intend to be fully collateralised, through securities issued or guaranteed by a Member State, should declare this in its prospectus.

UCITS should also identify the Member States, local authorities or international bodies issuing or guaranteeing securities that they accept as collateral for more than 20% of their NAV.

The introduction of this derogation is coupled with the obligation to provide clear information to investors about the fund’s collateral policy in its prospectus and annual report.


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ACCOUNTING TREATMENT OF LUMP‑SUM AND AGDL PROVISIONS

On 19 December 2014, the CSSF published Circular 14/599, amending the accounting treatment of lump‑sum and Luxembourg Association for Guarantee of Cash Deposits, Association pour la Garantie des Dépôts Luxembourg (AGDL) provisions.

While these provisions were maintained according to Financial Reporting (FinREP) instructions as at 1 January 2008, the new harmonized European reporting and the EU CRR Regulation 575/2013 require a recycling, in respect of IFRS accounting rules. Lump‑sum and AGDL provisions do not meet the definition of value adjustment as per IAS 39 (incurred loss) or provision as per IAS 37 (obligation to a third‑party). Therefore, the items constitute retained earnings.

OVERVIEW OF CHANGESCSSF Circular 14/599 is already applicable to the next filling of prudential reporting.

Lump-sum provision

The use of the lump‑sum reserve is restricted to the purposes for which it was set up and subject to the prior approval of the CSSF.

AGDL provision

This unavailable AGDL reserve can only be used for the purposes for which it was set up. Future cash contributions to Deposit Guarantee Schemes and Banking Recovery and Resolution systems will be recognised in the profit and loss account.


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TRANSPOSITION OF THE EBA GUIDELINES ON THE APPLICABLE NOTIONAL DISCOUNT RATE

On 30 October 2014, the CSSF published Circular 14/594 Transposition of the EBA guidelines on the applicable notional discount rate for variable remunerations.

These guidelines aim to explain the calculation and the rules for applying the discount rate referred to in Article 94(1)(g)(iii) of CRD IV.

Institutions may apply the discount rate in the calculation of the ratio between the fixed and variable components of remuneration to a maximum of 25% of the total variable remuneration, provided it is paid in instruments that are deferred for a period of not less than five years. ‘Discount ratio’ shall mean the value by which a nominal amount of variable remuneration, which will be acquired in the future, is multiplied to obtain the present value.

The EBA guidelines on the applicable notional discount rate for variable remuneration entered into force on 1 June 2014. The CSSF Circular 14/594 comes into force with immediate effect.


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FAIR AND EFFECTIVE MARKETS REVIEW CONSULTATION

How fair and effective are the fixed income, foreign exchange and commodities markets?

In October the UK’s Fair and Effective Markets Review published a consultation on the Fixed Income, Currency and Commodities (FICC) markets.

The Fair and Effective Markets review was set up in June 2014 by the Chancellor of the Exchequer, to assess how the wholesale financial services markets work and to make policy suggestions to tackle abusive behaviour and restore trust in the financial services sector.

The Fixed Income, Currency and Commodity markets consultation focuses on six key areas:

■■ Market microstructure

■■ Competition and market discipline

■■ Benchmarks

■■ Standards of market practice

■■ Responsibilities, governance and incentives

■■ Surveillance and penalties.

Within these six key areas, the Review is looking at deficiencies in current practices that lead to a loss of trust and the extent to which current regulatory and technological changes can address these deficiencies. Lastly, the paper looks at what steps are needed to ensure that the FICC markets are fair and effective.

The consultation invited suggestions for policy responses by markets, firms, individuals and regulators. The consultation closed on 30 January and State Street submitted a response.


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BANKING RECOVERY AND RESOLUTION DIRECTIVE FINAL RULES

In January 2015, the Prudential Regulation Authority (PRA) published a Policy Statement that sets out the final PRA rules implementing the BRRD in the UK.

The BRRD provides authorities with a common set of tools and powers for dealing with failing banks, and requires banks to facilitate this process, by providing information for recovery and resolution planning purposes, as well as meeting resolvability requirements.

The new rules apply to holding companies, mixed financial holding companies, mixed activity financial holding companies, banks, building societies and PRA designated investment firms. The rules require firms to produce recovery plans, which involves the identification of options to restore financial stability in times of stress, and resolution packs to aid resolution planning by relevant authorities.

The new rules and supervisory statements all took effect from January 2015, except for the rules to require a contractual clause recognising bail‑in powers in liabilities, governed under the law of a third country.


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DEPARTMENT OF WORK AND PENSIONS COMMAND PAPER, ‘BETTER WORKPLACE PENSIONS’

The government is introducing a series of reforms for UK workplace pension schemes, to ensure people saving privately for their retirement are doing so in high quality schemes that meet their needs. On 17 October 2014, the Department of Work and Pensions (DWP) published the latest consultation, setting out the legislative proposals intended to evolve workplace pension schemes to ensure schemes are well run and are in members’ interests. The paper Better workplace pensions: putting savers’ interest first, builds on the DWP Command paper Better workplace pensions: Further measures for savers, issued in March 2014.

The paper sets out a number of new standards designed to protect members of workplace schemes and includes the draft regulations which reflect the Government’s policy standards in relation to:

■■ Minimum governance standards

■■ Transparency of costs and charges

■■ Further information on the charges’ measures announced in the March Command paper

■■ Regulatory approach and compliance for occupational schemes.

The Financial Conduct Authority (FCA) will also be consulting on draft rules to implement the charges measures, coming into force from April 2015 and 2016.


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AUTUMN STATEMENT – MEASURES AFFECTING UK INVESTMENT FUND INDUSTRY

On 3 December 2014, the Chancellor of the Exchequer delivered the Autumn Statement. A number of the measures announced affect UK Investment Fund and Life and Pensions. The statement also underlined the UK’s commitment to the Organisation for Economic Co‑operation and Development (OECD) Base Erosion and Profit Shifting (BEPS), announcing legislation to implement OECD recommendations on country‑by‑country reporting, expected in the 2015 Finance Bill. In addition, the government proposed the introduction of a new tax, the Diverted Profits Tax, of 25%, applicable to profits from multinationals shifting the profits from economic activity in the UK abroad. This applies from April 2015 and is a leading step by the UK, further demonstrating their commitment to BEPS project.


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FCA’S NEW STRATEGIC APPROACH TO REGULATORY CHALLENGES

The FCA announced a number of changes designed to provide a ‘sharper focus’ on how firms are regulated and deliver the right outcome for consumers and the markets. Several structural changes within the FCA started on 5 January and will be fully implemented by April 2015.

The main changes include:

■■ Combining the current Authorisations and Supervision Divisions, with FCA’s specialist supervision functions, such as financial crime and client assets. Two Divisions will be created from April 2015, allowing for a clearer distinction between the FCA’s approach to the regulation of large and smaller firms.

■■ A new Strategy and Competition Division to improve the FCA’s competition capabilities and enable better prioritisation and focus across the FCA.

■■ A new Risk Division to provide a strategic approach to the FCA’s management of internal and external risk

■■ A new Markets Policy and International Division, to focus on increasing the FCA’s focus and influence on the European stage.

A Market Oversight Division will be created, incorporating the FCA’s UK Listing Authority and Market Monitoring functions. Other specialist market supervision functions will be integrated with Supervision.


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ABBREVIATIONS

ABI Associazione Bancaria Italiana (the Italian Banking Association)

ACPR Autorité de Contrôle Prudentiel et de Résolution (the French Regulator)

AGDL Association pour la Garantie des Dépôts Luxembourg (the Luxembourg Association for Guarantee of Cash Deposits)

AIC Association of Investment Companies

AIF Alternative Investment Fund

AIFM Alternative Investment Fund Manager

AIFMD Alternative Investment Fund Managers Directive

AML D IV Fourth Anti‑Money Laundering Directive

BaFin Bundesanstalt für Finanzdienstleistungsaufsicht (the German Federal Financial Supervisory Authority)

BEPS Base Erosion and Profit Shifting

BRRD Banking Recovery and Resolution Directive

CBI Central Bank of Ireland

CCP Central Clearing Party

CDS Credit Default Swap

CESR Committee of European Securities Regulators

CET Common Equity Tier

CNAV Constant Net Asset Value

CONSOB Commissione Nazionale per le Società e la Borsa

COVIP Commissione di Vigilanza sui Fondi Pensione (the Supervisory Commission of Italian Pension Funds)

CRA Credit Rating Agency

CRBF Comité de la Réglementation Bancaire et Financière (French banking and financial regulatory committee)

CRD IV Fourth Capital Requirements Directive

CRR Capital Requirements Regulation

CSD Central Securities Depository

CSDR Central Securities Depositories Regulation

CSSF Commission de Surveillance du Secteur Financier

DWP Department of Work and Pensions

EBA European Banking Authority

ECB European Central Bank


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ABBREVIATIONS (CONTINUED)

ECOFIN Economic and Financial Affairs Council

ECON Economic and Monetary Affairs Committee

EIOPA European Insurance and Occupational Pensions Authority

ELTIF European Long‑Term Investment Funds

EMIR European Market Infrastructure Regulation

ESAs European Supervisory Authorities (comprised of EBA, ESMA and EIOPA)

ESCB European System of Central Banks

ESMA European Securities and Markets Authority

ESRB European Systemic Risk Board

ETF Exchange Traded Fund

EU European Union

FICC Fixed Income, Currency and Commodities

FCA Financial Conduct Authority

FinREP Financial Reporting

FRC Financial Reporting Council

FRS Financial Reporting Standard

FSB Financial Stability Board

GAAP Generally Accepted Accounting Practice

G-SII Global Systemically Important Institutions

IFIA Irish Funds and Industry Association

IFRS International Financial Reporting Standards

IMA Investment Management Association

IORP II The second Institutions for Occupational Retirement Provision Directive

IPO Initial Public Offering

IRS Interest Rate Swap

ITS Implementing Technical Standards

KAGB Kapitalanlagegesetzbuch (the German Capital Investment Code)

KID Key Information Document LIBOR London Interbank Offered Rate

KWG Kreditwesengesetz (the German Banking Act)

LIBOR London Interbank Offered Rate

LVNAV Low Volatility Net Asset Value

MEP Member of European Parliament


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ABBREVIATIONS (CONTINUED)

MiFID Markets in Financial Instruments Directive

MMF Money Market Fund

MREL Minimum Requirements for own Funds and Eligible Liabilities

NAV Net Asset Value

NCA National Competent Authority

NDF Non‑Deliverable Forward

NPPR National Private Placement Regime

OECD Organisation for Economic Co‑operation and Development

OJ Official Journal

O-SII Other Systemically Important Institutions

PBS Pension Benefit Statements

PRA Prudential Regulation Authority

PRIIPs Packaged Retail and Insurance‑based Investment Products

QIAIF Qualifying Investor Alternative Investment Fund

QCCP Qualifying Central Counterparty

RTS Regulatory Technical Standards

SAG Gesetz zur Sanierung und Abwicklung von Kreditinstituten (the German Recovery and Resolution Act)

SFT Securities Financing Transaction

SME Small and Medium Sized Enterprises

SORP Statement of Recommended Practice

SRF Single Resolution Fund

SRM Single Resolution Mechanism

SSAP Statements of Standard Accounting Practices

SSM Single Supervisory Mechanism

ST MMF Short‑Term Money Markets Funds

TIOPA Taxation (International and Other Provisions) Act 2010

TLAC Total Loss‑Absorbing Capacity

UCITS Undertaking(s) for Collective Investment in Transferable Securities

VAT Value Added Tax

WPHG Wertpapierhandelgesetz (the German Securities Trading Act)

2012 / Q1 2013 / Q1 2014 / Q1 2015 / Q1 2016 / Q1Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 POST 2016

FTT

DATA PROTECTION

SOLVENCY II

IORP II

SFT

BENCHMARKS

SHAREHOLDERS RIGHTS DIRECTIVE

ELTIFs

PRIIPs

MMFs

UCITS V

CSMAD / MAR

MiFID II / MIFIR

CSD

EC LEGISLATIVE PROPOSAL

EIOPA REPORT ON LTG

PROVISIONAL LEVEL 1 TEXT









PROVISIONAL LEVEL 2 TEXT FULL DEMATERIALISATIONAPPLICATION DEADLINE

TRANSPOSITION DEADLINE

APPLICATION DEADLINE

APPLICATION DEADLINEJANUARY 2017

BY 2023-25

5-YEAR TRANSITIONAL PERIODFOR KID REQUIREMENTUCITS FUNDS

APPLICATION DEADLINEJULY 2016

APPLICATION DEADLINE

APPLICATION DEADLINEMARCH 2016

APPLICATION DEADLINEJANUARY 2017

APPLICATION DEADLINETBC





APPLICATION DEADLINESUBMISSION OF SET 1 ITS SUBMISSION OF SET 2 ITSPUBLICATION OF SET 1 GUIDELINES PUBLICATION OF SET 2 GUIDELINES






FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 2 TEXT

OMNIBUS II VOTED ON IN PARLIAMENT

FINAL LEVEL 2 TEXT

FINAL LEVEL 2 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT

FINAL LEVEL 1 TEXT EC LEGISLATIVE PROPOSAL






PROVISIONAL LEVEL 1 TEXT APPLICATION DEADLINEFINAL LEVEL 1 TEXT




EC LEGISLATIVE PROPOSAL – Q4 2011

EC LEGISLATIVE PROPOSAL – Q4 2011 FINAL LEVEL 2 TEXT

FINAL LEVEL 2 TEXT EC LEGISLATIVE PROPOSAL

COMPLETED MILESTONES

FUTURE MILESTONES

COMPLIANCE/APPLICATION/TRANSPOSITION DATE


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REGULATORY TIMELINE

IMPORTANT INFORMATION

This paper is for information purposes only and does not purport to represent legal advice. Recipients must not place reliance upon it without seeking professional advice tailored to meet their specific needs. State Street does not therefore accept any responsibility for any loss occasioned to any person howsoever caused, or arising, or as a result of, or in consequence of action taken in reliance on the contents of this paper.

Contact Information

If you have questions regarding State Street’s Regulatory Insights, please contact:

EUROPE Sven Kasper +44 20 3395 3723 [email protected]

Francis Wood +44 20 3395 3437 [email protected]

CHANNEL ISLANDS Russell Turner +44 1534 609508 [email protected]

FRANCE Tanneguy Cazin +44 203 395 2434 [email protected]

Angdy Ma +33 44 45 43 37 [email protected]

GERMANY Ines Cieslok +49 69 667745 104 [email protected]

IRELAND Simon Firbank +353 1 776 8726 [email protected]

Mary McCarthy +353 1 776 8411 [email protected]

ITALY Alberta Castoldi +39 02 3211 7135 [email protected]

Stefano Scribanis +39 02 3211 7347 [email protected]

LUXEMBOURG Sonia Biraschi +352 464 010 911 [email protected]

UNITED KINGDOM Jeanette Harper +44 131 315 5186 [email protected]

Tom Pool +44 20 3395 3587 [email protected]

State Street Corporation

State Street Financial Center

One Lincoln Street

Boston, Massachusetts 02111–2900

+1 617 786 3000

www.statestreet.comGS UK-0152

©2015 STATE STREET CORPORATION

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