Alternative Investments Legal | Issue 02/2018

Study on the Functioning of the Alternative Investment Fund Managers Directive (AIFMD)

The European Commission’s Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) has commissioned KPMG Law to investigate how the Alternative Investment Fund Managers Directive (AIFMD) works in practice and to what extent its objectives have been achieved.

Within this framework, an online-based survey with market participants such as AIFMs, depositaries, investors, financial intermediaries and asset managers is being conducted in 15 selected EU Member States, among others, under the leadership of KPMG Law, in order to record the experiences made in practice with the AIFMD application. In order to be able to record as comprehensive a picture as possible for the surveys, we would like to ask you – if you feel that you are a relevant market participant – to take part in the online-based survey and to use the link below for this purpose or to request a personalized link from us. The personalized link allows results to be cached if the survey is not completed in one step. The online survey will run until 30.03.2018.

The survey is complemented by an evidence-based study that examines the extent to which the rules of the Directive are effective, efficient, relevant and consistent in achieving the objectives of the AIFMD and what added value they have delivered for the EU.

The review of the AIFMD for its achievement of objectives includes a general overview of the functioning of the provisions of this Directive and of the experience gained in its application.

Publication of guidance letters on the classification of Initial Coin Offerings as financial instruments

For some time now, BaFin has been receiving an increasing number of inquiries as to whether tokens or coins or cryptocurrencies (uniformly referred to here as “tokens”) distributed to investors in Initial Coin Offerings (ICOs) are to be considered financial instruments.

BaFin published a guidance letter on Feb. 20, 2018, in which it comments on the regulatory classification of tokens in the area of securities supervision. This affects all market participants who provide services related to tokens, trade in tokens or offer tokens to the public. In order to fully comply with any legal requirements, these market participants are required to carefully check whether a regulated instrument exists, such as a financial instrument or a security. The obligation to comply with legal requirements applies in particular against the background of any licensing obligations under the KWG, KAGB, VAG or ZAG.

BaFin examines tokens on a case-by-case basis to determine whether they are financial instruments within the meaning of the WpHG or MiFID II, or securities within the meaning of the WpPG or investments under the VermAnlG. This examination is based on the legal requirements of the legal norms in the field of securities supervision, i.e. in particular the WpHG, WpPG, MAR, VermAnlG as well as other relevant laws and relevant national and EU legal acts in the field of securities supervision

Examination of regulatory measures for cryptocurrencies.

At a roundtable on Feb. 26, 2018, Commission Vice President Valdis Dombrovskis discussed the opportunities and risks of cryptocurrencies with authorities, industry representatives and experts.

The EU Commission will soon present an action plan for modern technologies in the financial industry (FinTech). Blockchain technology holds great promise for financial markets, he said. To remain competitive, he said, Europe must embrace this innovation. However, cryptocurrencies, which are not currencies in the traditional sense and whose value is not guaranteed, have become the subject of considerable speculation, he said. This, he said, exposes consumers and investors to significant risk, including the risk of losing their investments. The Commission is currently assessing whether regulatory action is required at EU level.

Furthermore, the Commission has proposed that virtual trading venues for cryptocurrencies should be subject to the Money Laundering Directive.

Capital management companies: Consultation on amended model building blocks for costs of open-end funds

On February 22, 2018, BaFin published for public consultation the draft of the revised model modules for cost clauses of open-ended public investment funds (excluding real estate investment funds) as well as the draft of the revised model modules for cost clauses of real estate investment funds.

BaFin will accept comments until 27.04.2018. The drafts replace the model modules for cost clauses of open-ended public investment funds (excluding real estate investment funds) and the model modules for cost clauses of real estate investment funds, both of which are dated September 4, 2012.

Incorporate guidance and questions and answers from the ESAs into their administrative practices.

In the interest of European harmonization of supervisory law, BaFin generally strives to adopt guidelines and Q&As of the ESAs in its administrative practice wherever possible. In the approximately 180 guidelines and 3,000 Q&As published to date, it has only refused to do so in a few cases, namely in particular when the specifics of German supervisory law precluded the adoption. BaFin will continue to proceed accordingly in the future. If, exceptionally, it does not adopt a guideline or Q&A into its administrative practice, it will explicitly state this on its website. In addition, BaFin provides links on its website to all published ESA guidance and its translation, as well as to all published Q&As. BaFin also provides its own non-binding translations for selected Q&As. Whether such a translation exists, however, has no significance for the authoritativeness of the Q&A in Germany.

Judgment on the assessment of the existence of grounds for opening insolvency proceedings

In a ruling now published, the BGH follows the “IDW Standard: Assessment of the Existence of Reasons for Opening Insolvency (IDW S 11)”. The BGH could previously be interpreted as meaning that an existing liquidity gap does not lead to an insolvency triggering the obligation to file for insolvency if sufficient payments are received in the following three weeks. Future outgoing payments (so-called liabilities II) are not relevant in this interpretation (so-called bow wave). In IDW S 11, a stricter view was already taken in the past, according to which an insolvency only does not exist if this gap will be eliminated with an overwhelming probability within three weeks, taking into account future incoming and outgoing payments. With the aforementioned ruling, the BGH now follows the stricter IDW view.

Draft bill on the exercise of options under the EU Prospectus Regulation and the amendment of other financial market laws published

On 13.02.2018, the BMF published the above-mentioned draft bill. This is intended to amend several financial market laws and regulations, esp. WpPG, WpPGebV, HGB, WpHG, VermAnlG, FMStFG, KWG, KAGB, GwG, essentially against the background of EU legal requirements. This serves the goal of contributing to stable and transparent financial markets in a legally secure environment, as well as making essential information available to investors. There is an opportunity to comment on the draft bill until 23.02.2018.

Publication of second and final set of recommendations to the EU Commission on the standard formula for calculating solvency capital requirements pursuant to Delegated Regulation on Solvency II

EIOPA published on 28.02.2018 the document “EIOPA`s second set of advice to the European Commission on specific items in the Solvency II Delegated Regulation”. In addition, a catalog with FAQs was published for this purpose.

Supervisory consequences of the Brexit

In a letter dated February 8, 2018, the EU Commission outlines the consequences of the UK’s exit from the EU for financial market regulation and prudential regulation. This is to prepare interested market participants for that date – March 30, 2019.