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Investment Management and Real Estate |

  1. 1. Investment Management and Real Estate MiFID’s impacts on investment management An extract from European IMRE News January 2008
  2. 2. MiFID’s impacts on investment management Several areas of ambiguity remain, especially over the treatment of outsourcing investment management and distribution of UCITS funds by UCITS management companies Matthias Schmitz With the Markets in Financial Instruments Directive (2004/39/EC – ‘MiFID’) and its PricewaterhouseCoopers implementing measures, the European Union has created a comprehensive (Luxembourg) regulatory framework for financial services rendered by banks and investment +352 49 48 48 2290 firms. Due to its broad scope, the investment fund industry also has to deal with the MiFID regulation. Odile Renner MiFID will have an impact on the investment management industry in the EU, as PricewaterhouseCoopers there remain several areas of legislation where overlaps between MiFID and the (Luxembourg) Undertakings for Collective Investments in Transferable Securities (UCITS) +352 49 48 48 2615 Directive (85/611/EEC as amended) have created uncertainty. This concerns in particular the outsourcing of investment management and the distribution of UCITS funds by UCITS management companies. How UCITS management companies fall into the MiFID net MiFID is a service-related piece of regulation that applies to investment firms and regulated markets, as well as to credit institutions providing investment services. Institutions that offer the services of investment advice or asset management have to comply with the MiFID provisions relating to areas such as organisational requirements, conduct of business rules and best execution standards. By contrast, the UCITS Directive is a product-related regulation, which exclusively regulates the management, administration and distribution of the UCITS product. According to Article 2 (1) h) of MiFID, collective investment undertakings, their managers and depositaries are exempted from MiFID provisions. However, if fund management companies offer individual portfolio management on a discretionary basis, and/or investment advice, MiFID standards apply directly to these additional service lines, in particular the provisions regarding minimum capital, organisational requirements and conduct of business obligations. Furthermore, while MiFID applies clearly to UCITS distribution by MiFID investment firms, it does not apply where the UCITS funds are distributed by their collective scheme manager. Areas of interaction The areas where UCITS and MiFID legislation overlap raise several important questions which need to be clarified in order to prevent inconsistencies in the application of the two types of legislation on both European and national levels.
  3. 3. 3 PricewaterhouseCoopers European Investment Management and Real Estate News September 2007 One area of overlap occurs where A second overlap occurs at the point of Clarification on these uncertainties is UCITS management companies distribution. Currently, it is still under expected from the Vade mecum of the delegate functions, particularly asset discussion whether distribution of third- European Commission on UCITS/MiFID management and distribution, to MiFID party UCITS is a service which may be interactions, which should be released investment firms or even other UCITS insourced by a UCITS management in early 2008. In the meantime, management companies. As yet it is company or whether this is a service however, market participants should be unclear whether the outsourcing of restricted to MiFID firms. If the latter aware of the ambiguities. asset management from one UCITS were the case, the MiFID conduct of Member States had to transpose management company to another business rules, and in particular those MiFID on 1 November 2007. While in constitutes the insourcing of on suitability or appropriateness and most Member States implementation discretionary portfolio management for inducements, would be applicable. This has been completed in time, others the insourcer and, consequently, means would mean that clients and investors are taking their time. that the insourcer needs an extended could be subject to different protection scope license. The EU’s ‘Questions and provisions depending on the point of Several countries have yet to Answers on MiFID’, published in sale approached. In any case, these transpose MiFID. September 2007, seems to suggest points leave room for interpretation by that this is the case. the national regulators. Transposition of Lamfalussy Directives – State of play as at 6/11/2007 Directive AT BE BG CY CZ DE DK EE IE EL ES FI FR HU IT LT LU LV MT NL PL PT RO SE SI SK UK Directive on Markets in OK EX OK EX NC EX EX NC EX OK NC EX EX NC EX EX OK EX EX EX NC NC OK OK NC OK OK Financial Instruments (2004/39/EC – MiFID) MiFID implementing OK EX OK EX NC EX EX NC EX NC NC EX EX NC EX CP OK EX EX EX NC NC OK OK NC OK OK Directive (2006/73/EC) CP: partially notified to the Commission NC: no notification received by the Commission EX: notification received and under examination by the Commission OK: notification received and checked by the Commission Source:
  4. 4. 30 PricewaterhouseCoopers European Investment Management and Real Estate News January 2008 Investment Management and Real Estate contacts European IMRE News is produced by experts in their particular field at PricewaterhouseCoopers, to address important issues affecting the investment management industry. If you would like to discuss any aspect of this document, please speak to your usual contact within the network of member firms of PricewaterhouseCoopers International Limited or one of those listed below: Global Investment Management Andrea Cerne-Stark Elisabetta Caldirola PricewaterhouseCoopers (Austria) PricewaterhouseCoopers (Italy) & Real Estate Leadership Team +43 1 501 88 1720 +390 2 7785 380 Emmanuele Attout Juris Lapshe Marc Saluzzi PricewaterhouseCoopers (Belgium) PricewaterhouseCoopers (Latvia) PricewaterhouseCoopers (Luxembourg) +32 2 710 40 21 +371 709 4400 Global Investment Management & Real Estate Brendan McMahon Chris Butler Industry Leader PricewaterhouseCoopers (Channel Islands) PricewaterhouseCoopers (Lithuania) +352 49 48 48 2511 +44 1534 838234 +370 5 239 2303 Costas Mavrocordatos John Parkhouse PricewaterhouseCoopers (Cyprus) PricewaterhouseCoopers (Luxembourg) David Newton +357 2 555 202 +352 49 48 48 2133 PricewaterhouseCoopers (UK) Petr Kriz Joseph Camilleri Global Investment Management Tax Leader PricewaterhouseCoopers (Czech Republic) PricewaterhouseCoopers (Malta) +44 20 7804 2069 +420 2 5115 2045 +356 25 647 603 Mikael Sørensen Fred Gertsen PricewaterhouseCoopers (Denmark) PricewaterhouseCoopers (The Netherlands) Uwe Stoschek +45 3945 9102 +31 10 407 6622 PricewaterhouseCoopers (Germany) Urmas Kaarlep Geir Julsvoll Global Real Estate Tax Leader PricewaterhouseCoopers (Estonia) PricewaterhouseCoopers (Norway) +49 30 2636 5286 +372 614 1801 +47 23 16 0540 Tuukka Lahkela Antoni F Reczek PricewaterhouseCoopers (Finland) PricewaterhouseCoopers (Poland) Kees Hage +358 9 2280 1333 +48 22 5234 339 PricewaterhouseCoopers (Luxembourg) Jean-Pierre Bouchart António Assis European Investment Management & Real Estate PricewaterhouseCoopers (France) PricewaterhouseCoopers (Portugal) Industry Leader +33 1 5657 1702 +351 213 197 013 +352 49 48 48 2059 Arno Kempf Vasile Iuga PricewaterhouseCoopers (Germany) PricewaterhouseCoopers (Romania) +49 69 9585 2367 +40 21 202 8800 Henrik Steinbrecher Edgar C Lavarello Richard Gregson PricewaterhouseCoopers (Sweden) PricewaterhouseCoopers (Gibraltar) PricewaterhouseCoopers (Russia) European Real Estate Industry Leader +350 78267 73520 +7 095 967 6327 +46 8 555 330 97 Nicos Komodromos Peter Vazan PricewaterhouseCoopers (Greece) PricewaterhouseCoopers (Slovak Republic) +30 210 6874 671 +421 25441 4101 Barry Benjamin David Wake Pierre de Villiers PricewaterhouseCoopers (US) PricewaterhouseCoopers (Hungary) PricewaterhouseCoopers (South Africa) North American Investment Management +36 1 461 9514 +27 11 797 5368 Industry Leader Hjalti Schiöth Antonio Greño +1 410 783 7623 PricewaterhouseCoopers (Iceland) PricewaterhouseCoopers (Spain) +354 550 5337 +34 91 568 4636 Robert Grome Damian Neylin Sussanne Sundvall PricewaterhouseCoopers (Ireland) PricewaterhouseCoopers (Sweden) PricewaterhouseCoopers (Hong Kong) +353 1 792 6551 +46 8 555 33 273 Pacific Rim Investment Management Industry Leader Mike Simpson Thomas Huber +852 2289 1133 PricewaterhouseCoopers (Isle of Man) PricewaterhouseCoopers (Switzerland) +44 1 624 689 689 +41 58 792 2436 Joseph Fellus Pars Purewal PricewaterhouseCoopers (Israel) PricewaterhouseCoopers (United Kingdom) +972 3 795 4683 +44 20 7212 4738 If you would like to receive copies of this newsletter or would like further information about PricewaterhouseCoopers Investment Management and Real Estate publications, please contact Denise Cook at Editor: Rupert Bruce
  5. 5. © 2009 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. PricewaterhouseCoopers provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. This report is produced by experts in their particular field at PricewaterhouseCoopers, to review important issues affecting the financial services industry. It has been prepared for general guidance on matters of interest only, and is not intended to provide specific advice on any matter, nor is it intended to be comprehensive. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers firms do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.