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19.12.2014 | KPMG Law Insights

Investment Law – Investment | Law | Compact – Issue 12/2014

Dear Readers,

As announced, we are pleased to send you today the first issue of our regular newsletter “Investment | Recht | Kompakt”.

Hardly a week goes by without ESMA making itself heard through consultations, discussion papers or FAQs.

At the national level, BaFin is forced to keep pace with ESMA. The result is a flood of announcements through which the reader must constantly dig if he wants to stay on the ball.

We hope to be able to contribute a little to making this happen.

With warm regards

Henning Brockhaus

BAFIN

BaFin bulletin on the prevention of pure blind pool constructions

With the publication of a catalog of criteria, BaFin is pursuing the goal of ensuring that closed-end public AIFs define their investment strategy for at least 60% of the capital to be invested.

The background of the leaflet is to prevent the conception of closed-end public AIFs as pure blind pools. Initially, a minimum investment strategy of at least 80% was required, but BaFin refrained from doing so.

The supervisory authority sets specific requirements for the issuance of corresponding products regarding the level of detail in the description of the assets to be acquired. The criteria are also applicable to multi-level fund constructions with special purpose vehicles, but not to multi-level fund constructions in the form of closed-end AIFs; in the latter cases, however, information on the fund type, investment strategy, etc. must be provided.

For the investment criteria, BaFin distinguishes between the asset classes of real estate, ships, aircraft, renewable energies and corporate investments. The criteria must be met upon completion of the investment phase specified in the investment conditions, which may last up to 3 years.

The list of criteria to prevent pure blind pools can be found here.

BAFIN

No unlimited term for closed-end public AIF in the form of the investment limited partnership

BaFin announced in a notice dated November 9, 2014, that a closed-end AIF could not have an indefinite life. Rather, the specific term of the AIF must be specified in the investment conditions or in the partnership agreement.

Ordinary rights of termination shall be excluded. When structuring the fund and preparing the corresponding documentation, care must be taken to comply with the requirements of BaFin in order to ensure the closed-ended status of the respective AIF – if desired in the individual case.

You can find the notice from BaFin here.

BAFIN

Renewed BaFin seminar on the KAGB

On November 12, 2014, BaFin once again held a seminar on the German Capital Investment Code, which came into force on July 22, 2013. The seminar focused in particular on the topics of depositaries, cost clauses, sample modules for cost clauses of closed-end public investment funds as well as distribution and acquisition of investment funds.

Compared to the first KAGB seminar on October 6, BaFin clarified that registered external capital management companies are not allowed to provide ancillary services according to Section 20 (3) KAGB.

The presentations and remarks of the seminar can be found here. (as of: October 2014)

BAFIN

Consultation of BaFin on the amendment of the DerivateVO

BaFin plans to align the regulations of the DerivateVO with the guidelines on exchange-traded index funds and other UCITS topics of August 8, 2014, as amended by ESMA.

The amendment to the Derivatives Regulation relates in particular to the diversification of collateral. According to ESMA’s amended guidelines, lower diversification requirements are to be applied in the future if the collateral is issued or guaranteed by sovereign issuers. If use is to be made of these lower diversification obligations, this must be disclosed to the investor.

With these concrete requirements on the diversification of collateral, ESMA and BaFin are taking an important step towards creating further clarity in the interpretation of the DerivateVO.

The draft of the Amendment Ordinance together with a statement of BaFin’s reasons for the amendments can be found here.

ESMA

ESMA publishes updated Q&As on the AIFMD

On November 11, 2014, ESMA published an updated set of questions and answers.

In particular, in Section III on reporting to national authorities, ESMA has published new questions and answers. In addition, a new section VIII, “calculation of the total value of assets under management”, has been added with corresponding questions and answers.

The updated Q&As can be found here.

ESMA

Final Report of ESMA on UCITS depositaries

On November 28, 2014, the European Securities and Markets Authority (ESMA) published its “Final Report” on insolvency protection in the case of sub-custody and on the independence of the depositary.

On the subject of depositary independence, ESMA has dropped the requirement previously discussed in Consultation Paper ESMA 2014/1183 that the investment company and depositary must not belong to the same group. This was already discussed during the amendment of the Investment Act in 2007 and was not enforced at that time either. However, ESMA clarifies that a “group depositary” is subject to certain organizational requirements.

The “Final Report” of ESMA can be found here.

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Contact

Henning Brockhaus

Partner

THE SQUAIRE Am Flughafen
60549 Frankfurt am Main

Tel.: +49 69 951195061
hbrockhaus@kpmg-law.com

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