31.10.2016 | KPMG Law Insights

Alternative Investments Legal – Alternative Investments Legal | Issue 10/2016

Dear Readers,

In October, there were again important innovations on the topic of alternative investments on a national and international level.
Among other things, ESMA has published supplemented guidelines on sound remuneration policies under the AIFMD.
Furthermore, the Federal Ministry of Finance has published a draft bill on the 2nd Financial Market Amendment Act (2. FiMaNoG), which is intended to transpose MiFID II together with the associated regulation (MiFIR) and other EU regulations into national law.
We would also like to draw your attention to an article on the topic of “Banking supervision regulates shadow banks”.
We wish you stimulating reading.

With best regards
Dr. Ulrich Keunecke


ESMA published the new guidelines on sound remuneration policies under the AIFMD on 14.10.2016 and in this context amended Section VIII of the guidelines.

The amendments indicate that it is possible that, in the context of a group, the industry-specific supervisory rules for non-AIFMs applicable to entities in the group may result in certain employees of the AIFM belonging to the group being considered “identified employees” for the purposes of those industry-specific rules on remuneration.

The change is effective from 1.01.2017.

Related links

ESMA’s press release and the new guidelines can be found here


Federal Ministry of Finance publishes draft bill on the 2nd Financial Market Amendment Act (2. FiMaNoG)

The draft bill dated 29.09.2016 serves to transpose the revised Financial Markets Directive (MiFID II) and the associated Regulation (MiFIR), the EU Regulation on transparency of securities financing transactions and re-use and amending Regulation (EU) No. 648/2012 (Regulation (EU) No. 2015/2365, SFT Regulation) and the Benchmark Regulation (Regulation (EU) No. 2016/1011) into national law.

To implement these EU regulations, amendments to the German Securities Trading Act (WpHG), the German Banking Act (KWG) and the German Stock Exchange Act (BörsG) are necessary. In addition, there are amendments to the German Insurance Supervision Act (VAG) and the German Investment Code (KAGB), among others, as well as numerous consequential amendments to other regulations, as the Act is being used as an opportunity to renumber the WpHG for better clarity.

Within the framework of the KAGB, the following innovations are to take place in particular: Section 5 KAGB is to receive two new paragraphs. The new paragraph 9 is intended to enable BaFin to take action against management companies and investment funds for violations of Regulation (EU) No. 2015/2365 (STFR). The new paragraph 10 gives the Federal Supervisory Authority the possibility to take action against management companies and investment funds for violations of Regulation (EU) No. 2016/1011. Under this provision, the Federal agency is to have the authority to take all measures appropriate and necessary to monitor compliance with these regulations.

Pursuant to Section 14 KAGB, companies in the other legal forms permitted for investment funds under the KAGB are now also to be required to provide information to BaFin. This is intended to close this previous regulatory gap.

As part of the prosecution of unauthorized investment transactions, it should now be possible to query the accounts of the company in order to identify accounts with credit balances for the purpose of initiating an account freeze, if necessary, to ensure repayment of the capital (Section 16 KAGB).

There are also new regulations regarding the independence of the supervisory board of the external UCITS capital management company from the depositary (Section 18 KAGB).

A Capital Investment Audit Report Ordinance (KAPrüfbV), which is yet to be issued, is to be standardized for further obligations, inter alia, within the meaning of Section 38 KAGB.

Against the background of the investors’ equal need for protection and protection, the new Section 82 (6) sentence 2 provides for an extension of the new requirements for ensuring the insolvency resistance of the assets of a UCITS in the case of sub-custody, which are substantiated by delegated acts, also to public AIFs.

The amendment to Section 221 (2) is intended to clarify, in accordance with the consistent administrative practice of the Federal Financial Supervisory Authority, that the acquisition of units in mixed investment funds by other investment funds is also subject to the cascading prohibition.

Until 28.10.2016 there is the possibility to comment in writing on the draft bill.

Related links

More information can be found here.


BaFin Consultation 09/2016 – “Minimum regulatory requirements for the business organization of insurance companies”.

BaFin has published a draft circular 09/2016 on the “Minimum Supervisory Requirements for the Business Organization of Insurance Companies” (MaGo) for consultation.

The aim of the circular is to combine overarching aspects of business organization as far as possible without repeating the requirements of the ISA, the DVO and the EIOPA guidelines.

Related links

For further information, please refer to the BaFin announcement under this link


BaFin updates information on transition period for new video identification procedure

BaFin Circular 4/2016 was suspended until the end of 2016 by announcement of July 11, 2016. Work is currently underway on the concrete design of adequate and practicable security requirements for the video identification process. BaFin intends to publish a new circular 1/2014 on this subject at the beginning of 2017.

Until this new standard comes into force, Circular 04/2016 (GW) will remain suspended and Circular 1/2014 will continue to apply in this respect.


Article on “Banking supervision regulates shadow banks” published in private banking Magazin

As of 01.01.2017, the EBA guideline for shadow banks takes effect. Bafin intends to implement this through a circular that was put out for consultation in June 2016. The regulations are then to be taken into account from 01.01.2017 without any further transitional period.

The article “Banking Supervision Regulates Shadow Banks” by Dr. Ulrich Keunecke discusses the extent to which investment funds and securitization vehicles fall under the concept of shadow banks.

For participations in investments that could qualify as shadow banks, the implications of the EBA Guideline and its organizational requirements, especially in its interpretation of the scope of application, should be carefully considered.

Related links

The article can be viewed here.


“Call for evidence regarding asset segregation” – ESMA publishes responses.

In the July issue of our monthly newsletter, we informed you about ESMA’s consultation on segregated custody of fund assets and custodial services under the AIFMD.

The background to the consultation is the introduction of new requirements for the separate safekeeping of assets in the UCITS V Directive.

ESMA has now published the answers to the questions posed in the consultation on 28.09.2016.

For example, Deutsche Kreditwirtschaft responded that, among other things, it does not consider the introduction of new account management or segregation models to be necessary, but that the concept of delegation of the depositary requires clarification.

Related links

The July issue of our newsletter can be viewed here, and the responses can be viewed here.


EBA Opinion on the “Call for advice” on the application of CRD/CRR to investment firms

The European Banking Authority has issued an opinion in response to a request regarding the criteria for determining the investment companies covered by the supervisory regime under CRD/CRR.

In principle, the EBA recommends that the regulatory provisions of CRD IV and CRR only apply in full to investment companies classified as “Other Systemically Important Institutions (OSIIs)”.

Related links

You can find more information about this at this link.


ESMA publishes updated question/answer catalog on the AIFM Directive

On 06. 10.2016, ESMA has published its “Updated AIFMD Q&A”.

The question was raised as to whether information on securities financing transactions and total return swaps, which are required in accordance with Article 13 of Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25.11.2015 on transparency of securities financing transactions and re-use and amending Regulation (EU) No 648/2012 (SFT Regulation) by UCITS management companies or investment companies in semi-annual and annual reports, or by AIFM in annual reports, are to be included in the first semi-annual or annual report to be published after 13 2017.

ESMA assumes that the inclusion shall be made in the next semi-annual or annual report published after 13.01.2017 – the day from which Art. 13 SFTR becomes applicable.

You can find the question/answer catalog at this link.


ESMA publishes updated question/answer catalog on the Market Abuse Regulation (MAG)

ESMA published the updated “Q&A” catalog on October 26.

The first newly answered question concerns managers’ own transactions, Art. 19 MAR. According to its paragraph 1, certain notifications must be made in the case of various transactions by executives and related persons. Pursuant to paragraph 8, this paragraph shall apply to transactions entered into after a total volume of EUR 5,000 has been reached within one calendar year. The question now was how to proceed with a transaction that was not made in euros. ESMA assumes that what matters is the official daily foreign exchange rate in effect at the end of the business day on which the transaction is executed. If available, the daily euro exchange rate published by the European Central Bank on its website should be used.

The other updated questions and answers deal with the concept of “investment recommendations” according to. Art. 3 (1) No. 33, 34 MAR. In response to the question as to whether any oral or electronic communication (e.g. telephone conversations, chats or sales notes) also falls under this, ESMA answers that any communication that meets the criteria of the definition of investment recommendation also falls under this term. In determining whether a communication is an “investment recommendation,” an evaluation should be made based on the content of the communication regardless of its name or designation, format, form, or the medium to which it is transmitted (whether electronic, oral, or otherwise). With regard to sales notes, etc., this depends on the individual case.

It was further asked whether communications that do not refer to one or more financial instruments or issuers can be considered “investment recommendations” under MAR. ESMA believes that a communication that does not refer to a financial instrument or issuer should not, in principle, be considered an investment recommendation. However, the assessment of whether this communication could be an investment recommendation should be made on a case-by-case basis.

The question of whether an investment firm that prepares an investment recommendation falls within the scope of Article 3 (1) No. 34 item. i, even if the preparation of this recommendation is not part of its main business, is answered by ESMA as follows: Any information provided by an investment firm that includes direct or indirect investment proposals for a financial instrument or an issuer falls under “recommendation or proposal of an investment strategy” as defined in the rule, regardless of whether it is part of the investment firm’s main business. It is noted that an “other person whose principal activity is to make investment recommendations” means any person other than “independent analysts, investment firms and credit institutions.”

Lastly, the question was raised whether material intended for dissemination channels or for the public about one or more financial instruments that makes statements indicating that affected financial instruments are “undervalued,” “appropriately valued,” or “overvalued” is included in the definition of “investment recommendation” under MAR. In this regard, ESMA considers that such material relating to one or more financial instruments and subject to MAR constitutes an implicit recommendation or proposal of an investment strategy (as defined in Article 3(1)(34) of MAR), provided that it contains an assessment on the price of the financial instruments concerned. In addition, material containing an estimate or other expression of opinion on the value of financial instruments is also included herein.

The question/answer catalog on the Market Abuse Regulation is available here.


Implementing Regulation on Credit Rating Agencies published in EU Official Journal

The following implementing regulations were published in the EU Official Journal on October 12:

Implementing Regulation (EU) 2016/1799 laying down implementing technical standards as regards the assignment of credit assessments of credit risk by external credit assessment institutions in accordance with Article 136(1) and Article 136(3) of Regulation (EU) No 575/2013, Implementing Regulation (EU) 2016/1800 laying down implementing technical standards with regard to the assignment of external credit assessment institutions’ credit ratings to an objective scale of credit quality steps in accordance with Directive 2009/138/EC; and Implementing Regulation (EU) 2016/1801 establishing implementing technical standards with regard to the assignment of credit assessments for securitizations by external credit assessment institutions in accordance with Regulation (EU) No. 575/2013.

The former implementing regulation governs, in particular, quantitative and qualitative factors of rating categories and lays down rules on the reference value.

The next following implementing regulation contains rules for assigning ratings from external credit rating agencies to an objective scale of credit quality steps.

The latter implementing regulation includes allocation tables in accordance with the standardized approach and the ratings-based approach.

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