11.02.2015 | KPMG Law Insights

Investment Law – Investment | Law | Compact – Issue 2/2015

Dear Readers,

The new year has not yet brought much news on the regulatory front for asset managers and custodians.

There was no need for that – ESMA left us with plenty to read and think about on December 19, 2014 with the Final Report on the LeveI 2 measures for MiFID 2.

The last few weeks have been dominated by sorting out and interpreting the regulations, some of which are very confusing.

For capital management companies, it is a matter of analyzing how and where they are affected by the new regulations. We will be happy to assist you in word and deed.

In line with the situation, we have once again taken a special look at a MiFID 2 topic – from the perspective of the capital management company.

With warm regards

Henning Brockhaus


MiFID 2 grant rules under the capital management company’s magnifying glass

ESMA’s final recommendations for Level 2 measures for MiFID 2 have been available since December 19, 2014. It is widely known that the issue of benefits in connection with securities financial services is a focal point.

Although capital management companies are not within the scope of MiFID…

In principle, capital management companies are not investment firms within the meaning of MiFID. Unless they also provide MiFID-relevant ancillary services (for example, financial portfolio management and/or investment advice), they are therefore not directly in the focus of the Financial Markets Directive.

…. but still affected

As capital management companies generally pay remuneration to distributors and other third parties, the new regulations are nevertheless relevant to them, albeit indirectly – from the point of view of MiFID and distributors: distributors may now only accept contributions from capital management companies if they can prove, among other things, that the contributions are intended to improve the quality of a specific service provided by the distributor.

Capital management companies in the grip of AIFMD and MiFID

Less in the spotlight is the fact that the AIFMD Level 2 Regulation (213/2013/EU) uses largely the same wording: There, AIFM are prohibited from paying commissions if they are not designed to “improve the quality of the [verprovisionierten] service” (Art. 24 para. 1 a) ii)).

And this does not only apply to the management of AIFs: Via the Capital Investment Conduct and Organization Ordinance (KAVerOV), the national legislator has also extended this regulation to the management of UCITS (Section 2 (1) KAVerOV).


It stands to reason that the further interpretation of the wording in Article 29 of the AIFMD Level 2 Regulation will be guided by the considerations and requirements contained in ESMA’s Final Report on MiFID 2. This will then also apply to UCITS via the KAVerOV.

Recital 44 of the AIFMD Level 2 Regulation also confirms this. It states that, for reasons of consistency, the principles on incentive payments must also apply to capital management companies providing collective asset management services.

Accordingly, capital management companies themselves are under an obligation not to make any contributions that are not accompanied by a demonstrable improvement in service quality. The burden of proof, however, lies with the capital management company obligated by the regulation.

Here you can find ESMA’s Final Report of December 19, 2014, the Consultation Paper as well as its Annex B. Please also visit our MiFID 2 website.


ESMA publishes updated Q&A on the application of the AIFMD

On January 9, 2015, ESMA published an updated set of Questions and Answers (Q&A) on the application of the AIFMD (“Application of the AIFMD”).

The additions relate to Section III of the Q&A’s on reporting obligations to national authorities under Articles 3, 24 and 42 of the AIFMD. ESMA has added new Q&A’s at this point (see Q&A 50 to 53).

ESMA’s updated Q&A can be found here.


ESMA publishes updated Q&A on ESMA’s “Guidelines on ETFs and other UCITS issues”.

Also on January 9, 2015, ESMA published an updated Questions and Answers (Q&A) catalog on ESMA guidelines on ETFs and other UCITS topics. The European Securities and Markets Authority has supplemented the Q&A in the areas of “Financial derivative instruments” and “Collateral management”.

New is the indication that a counterparty has no influence on the composition or management of a portfolio if it exclusively implements the investment policy agreed with the capital management company without having any discretion of its own.

In addition, ESMA clarifies that cash collateral received may only be invested in money market funds that in turn invest no more than 10% of their fund assets in other money market funds.

ESMA’s updated Q&A can be found here.


BaFin updates leaflet on reporting obligations of AIF management companies according to § 35 KAGB

On February 4, 2015, BaFin updated its leaflet on reporting requirements (Section 35 KAGB) of AIF management companies. In particular, information is now provided on a test phase of a reporting system launched on February 9, 2015, as well as further details on the procedure via the reports.

The updated BaFin fact sheet can be found here.

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Henning Brockhaus


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