Legal shorts 20.03.15 including March 2015 Budget and disguised fee income su...
Legal shorts 21.03.14 including Budget 2014 and UCITS V
1. Welcome to Legal Shorts, a short briefing on some of the week’s developments in
the financial services industry.
Listen to this week's Legal Shorts on CLTV by going to
http://vimeo.com/cummingslaw
If you would like to discuss any of the points we raise below, please contact me or
one of our other lawyers.
Claire Cummings
020 7585 1406
claire.cummings@cummingslaw.com
www.cummingslaw.com
Budget 2014
The Chancellor delivered the 2014 Budget this week and three major
announcements will affect in particular the financial services industry,
namely measures relating to the bank levy, offshore funds and annuities.
Whilst bank levy rates remain unchanged, a new basis for setting bank levy
charges is to be trailed in a consultation document next week. Under the
current legislation, a company can be designated as eligible for UK taxes if
its central management and control functions are exercised in the UK, but
this will no longer be the case, as the government is to widen the scope of
section 363A of the Taxation International and Other Provisions Act 2010
(TIOPA) to remove the risk that offshore funds managed from the UK could
be deemed UK resident for tax purposes. Non-UK UCITS funds were
already exempt and the budget will now extend that treatment to all
alternative investment funds. As regards pensions, all tax restrictions on
access are to be removed, which will end the requirement to buy an annuity.
The budget also confirmed that Schedule 19 Stamp Duty Reserve Tax would
2. be abolished for unit trusts and open-ended investment companies, as
announced last year, and that the Seed Enterprise Investment Scheme (SEIS)
is to be made permanent.
UCITS V
The EU Council has announced that COREPER has approved an agreement
with the European Parliament on the proposed text of UCITS V. The
compromise text results from the provisional agreement on the text reached
in February 2014. The Council explains in the press release that COREPER's
agreement will enable UCITS V to be adopted at first reading before the
Parliament adjourns for elections at the end of May 2014. According to the
press release, Member States will have 18 months to transpose UCITS V
into national law and depositories will be given an additional 24-month
transition period after the transposition deadline.
EMIR
NASDAQ OMX Clearing has become the first clearing house in Europe to
be authorised as EMIR compliant, as the Swedish FSA (SFSA) has approved
its application as a central counterparty under EMIR. For banks and broker
firms using NASDAQ OMX Clearing, the EMIR authorisation confirms that
the risk models, systems and operations are resilient and robust and have the
ability to handle increased demand during periods of market stress.
NASDAQ OMX Clearing was also the first clearing house to have a solution
that provides protection to client assets in the case of a default of a clearing
member.
EMIR: FCA reminder to firms reporting to TRs
The FCA updated its transaction reporting webpage to remind firms that
reporting to trade repositories under EMIR does not replace any transaction
reporting obligations. The EMIR reporting obligation to report to trade
repositories came into effect on 12 February 2014. Accordingly, firms'
3. transaction reporting obligations remain unchanged and they should
continue transaction reporting according to their existing arrangements,
submitting their transaction reports using an Approved Reporting
Mechanism (ARM) in accordance with Chapter 17 of the Supervision
sourcebook.
FCA and BOE MoU on supervision of markets and market
infrastructure
The FCA and the Bank of England have reviewed and republished the MoU
on responsibilities for the supervision of financial market infrastructure. As a
result of the review, the FCA and PRA have concluded that the MoU's co-
operation arrangements over the first 11 months of the new UK financial
services regulatory regime have worked well and in a co-ordinated manner,
with no material duplication. The BoE has also published its annual report in
this respect and the BoE's priorities for 2014 include: credit and liquidity
risk; recovery and resolution; operational risk management; new payments
systems regulator; and proposed regulation on improving securities
settlement and regulating central securities depositories (CSD Regulation).
White list of specified transactions published
The Investment Transactions (Tax) Regulations 2014 were made this week
and consolidate and expand the "white list" of transactions. The income
from such white list transactions will not be treated as trading income for the
purposes of the taxation of authorised investment funds (AIFs), exempt
unauthorised unit trusts, investment trusts and offshore funds. The
Regulations are substantively identical to the draft version published on 20
December 2013 and have effect for transactions entered into on or after 8
April 2014.
4. CRR delegated Regulation
The European Commission has published the EC delegated Regulation with
regard to RTS for own funds requirement, as required by the CRR and CRD
IV. The RTS cover areas including: common equity tier 1 (CET1) capital,
additional tier 1 capital, deductions from CET1 capital and from own funds
in general, transitional provisions for own funds in terms of grandfathering,
the conditions under which competent authorities may determine that an
undertaking qualifies as a mutual, co-operative society, savings institution or
similar institution for the purposes of the CRR own funds requirements and
the specification of the concept of gain on sale.
FCA’s new webpage on supervisory approach
The FCA has published a new webpage with links to four new guides for
firms relating to its supervisory approach. The guides apply to C1 groups,
C2 firms and groups, C3 firms and C4 firms respectively. According to the
webpage, the guides bring together, and build on, previously published
information, setting out what firms can expect from the FCA in terms of
supervision, and what the FCA expects from firms, expanding on the details
in certain areas. The webpage adds that the guides "do not give the step-by-
step process for every aspect of supervision, as this will vary by firm and
sector...” but that they explain the reasoning behind the FCA's approach.
BoE internal investigation on FX manipulation
The House of Commons Treasury Select Committee has published the oral
evidence given by Mark Carney and Paul Fisher (BoE director for markets)
at a hearing last week into the BoE’s internal investigation into alleged FX
manipulation. In response to a statement by Mr Carney that it is the FCA’s
responsibility to investigate the markets as appropriate, the FCA has
addressed a letter to the Select Committee. The letter advises that, as part of
its own forex market investigation, the FCA is not investigating the BoE. It
explains that the BoE is an exempt person and the FCA has no jurisdiction
over the BoE's internal controls. The FCA is able to request information
from non-authorised persons and confirmed that the BoE has provided
5. relevant information to it and has committed to continue to do so.
GUEST SHORTS
This week, Andreas Woelfl from Argentarius, a service provider for
securitisations of alternative investments, informs us on exchange traded
instruments, as follows:
“ETI Securities offer an interesting and cost-effective solution for managers
who either want to continue marketing their fund in the EU post-AIFMD,
without having to endure the somewhat arduous and expensive compliance
process, or are alternatively looking to securitise non-eligible securities such
as private equity into a listed and UCITS-eligible format with daily liquidity.
One particular group who could benefit from this in particular are CTA or
commodity funds who have significant commodity futures exposure and are
currently utilising some type of synthetic replication such as a Total Return
Swap in order to replicate the commodity performance of their portfolio.
ETIs or Exchange Traded Instruments are structurally the same as ETCs
(Exchange Traded Commodities) and represent securities linked to and
backed by an asset such as an investment fund. Due to a specific ECB
exemption, regulation 24/2009, ETIs fall outside the scope of AIFMD. This
means that the manager is able to market a listed feeder fund with an EU
passport without having to alter its existing structure. Further, as of 1st
January 2014, UCITS funds can no longer allocate as part of their TRASH
quota; an added benefit of an ETI is that the structure then becomes UCITS
eligible, such that a UCITS fund of fund vehicle is able to purchase the
security without any restrictions.
ETI Securities is currently one of the leading issuers of these types of
instruments and has thus far completed 11 listings on the Frankfurt Stock
Exchange.”
If you would like to discuss the above or receive further information
regarding exchange-traded instruments, please contact Andreas Woelfl at
a.woelfl@argentarius.pro.
