UK Regulator Sets Out New Rules for the Fund Platforms Industry

The Financial Conduct Authority (FCA), UK has published rules to make the way that investors pay for platforms more transparent. In the future, platforms, in both the advised and non-advised market, will not be allowed to be funded by payments (commonly described as ‘rebates’) from product providers. Instead, a platform service must be paid for by a platform charge which is disclosed to and agreed by the investor. 

Currently, providers of investment products, such as investment managers, generally pay a rebate to some platforms in order to have their products included on a platform. This rebate comes from the annual management charge (AMC) which is paid by the investor to the fund manager. As a result, some platforms are able to give the impression that they are offering a free service, which means that the investor may not understand the true cost of the service provided by the platform.

It can be difficult for investors to compare prices and products available on different platforms. There is also a risk that these payments could lead to product bias in the investment market, as products offered by providers who are unwilling or unable to pay a rebate to the platform from their product charges may not have their products available to the investors using that platform.

The FCA is making changes to ensure that investors can make fully informed choices if they wish to use a platform and understand what they are paying for the service the platform provides. These changes include:

• making the cost of the platform service clear to investors by ensuring that the platform service is paid for by a platform charge which is disclosed to and agreed by the investor
• banning cash rebates for non-advised platforms to prevent these payments being used to disguise the costs of the platform charge

These rules will come into force on 6 April 2014 but platforms will have two years to move existing customers to the new explicit charging model. At the end of the two year transitional period (6 April 2016) platforms will have to charge its customers a platform charge for both new and existing business. 

Christopher Woolard, director of policy, risk and research, said: "Platforms provide a valuable service but investors are often unclear on what that service costs.  These rules ensure that platforms put customers at the heart of their business. Customers will know what they are paying and the service that they can expect. These changes will allow both investors and advisers to compare the costs of investing through different platforms and make an informed decision on whether using a platform represents good value for money. 

"We have listened to industry concerns and have introduced rules that are proportionate, recognise how the industry works in practice and the competitive role platforms play in the market. We are encouraged to see signs that the market has already started to move to products which have transparent charging structures that help consumers in anticipation of this change."

Korean Regulator Introduced National Happiness Fund

In gloomy international financial market, The Financial Services Commission (FSC), South korea has given a reason to cheer to common investor through unveiling details about the National Happiness Fund, which has been officially launched on March 29, 2013. The Fund aims to help credit recovery of delinquent borrowers and heavily-indebted low-income earners with programs including restructuring debt, easing debt servicing burden on student loans, and converting high-interest loans to lower-interest ones.

Those programs will need a total of KRW 1.5 trillion over the next 5 years. The Fund will initially raise KRW 800 billion through the KAMCO-controlled fund, loans and bond issuance. The remaining KRW 700 billion will be funded by the Fund’s proceeds and guarantee fees. Financial institutions and non-bank lenders which sign an agreement for credit recovery assistance will be obliged to sell overdue loans to the Happiness Fund if their borrowers apply for debt restructuring.

PROGRAMS TO BE FUNDED BY THE NATIONAL HAPPINESS FUND

1. Credit Recovery Assistance Program

Debt restructuring for overdue loans will be operated with two tracks:

(1) Debt restructuring by borrowers’ prior application
 

The fund will purchase overdue loans by prior application of debtors who borrowed from the enlisted financial institutions.

(2) Debt restructuring by borrowers’ later consent

For overdue loans without borrowers’ application for debt restructuring, the fund can first purchase the loans from the enlisted financial institutions and then conduct debt restructuring by obtaining borrowers’ later consent.

2. Debt Restructuring for Student Loans

eligible applicants - Individuals who give later consent to debt restructuring for overdue loans that the Fund purchased from the Korea Student Aid Foundation (KOSAF)

- Individuals with student loans overdue for 6 months or longer as of end-February 2013 from the enlisted financial institutions benefits -Debt can be written-off or rescheduled depending on applicants’ ability to repay.

-Debt repayment can be deferred until the applicant finds a job. Nullification of benefits If the applicant did not faithfully fulfill their debt restructuring obligation, or hidden assets were detected, all the benefits would be nullified.

how to apply After July 2013, the Fund or the KOSAF individually contact eligible beneficiaries to
confirm their consent to debt restructuring.

3. Conversion of Outstanding Loans into Lower-interest Loans

eligible applicants - Individuals who borrowed loans at 20% or higher from financial institutions or registered non-bank lenders; diligently repay their debt for the last 6 months or longer as of end-February 2013; and earn less than 40 million won a year 

benefits -Outstanding loans with 20% interest rate or higher can be converted to loans with lower-interest rates above 10%. For each borrower, up to 40 million of outstanding loans can be converted.

Bermuda Prepares To Sign AIFMD Cooperation Agreement With European Securities And Markets Authority

The Bermuda Monetary Authority announced that they are advancing preparations to sign a cooperation agreement with Europe under the Alternative Investment Fund Managers Directive (AIFMD).

The AIFMD is due to be implemented across Europe by 22 July 2013. The Authority has been in discussions with the European Securities and Markets Authority (ESMA), and is aiming to sign the co-operation agreement required for third country regulators under the Directive before the July deadline.

“Bermuda’s existing regulatory framework for investment funds already provides the foundation to support the level of cooperation ESMA is seeking,” said Jeremy Cox, CEO of the Authority. “Therefore, we are in a good position to facilitate Bermuda-based funds and fund managers who want to conduct business in Europe once the AIFMD is implemented.”

Bermuda can satisfy the three core conditions that are most relevant to third countries under the AIFMD, namely that:

1.There is in place a cooperation agreement with the third country fund domicile and home member state;

2.Third countries (manager domicile or fund domicile) are not on the Financial Action Task Force list of noncooperative jurisdictions;

3.Agreements for exchange of information for tax purposes are in place between European Union (EU) States andnon-EU jurisdictions.

“We will be working on confirming details under the agreement in the coming weeks,” explained Mr. Cox. “This means Bermuda can still offer significant benefits for new and existing funds and fund managers seeking access to Europe, while also servicing those looking to operate in non-EU markets.”

Mr. Cox added that the Authority has also been actively engaged with the Bermuda Government and market practitioners in the jurisdiction to consider stakeholder input on the AIFMD. “Bermuda is a sophisticated funds jurisdiction with considerable expertise and the professional services infrastructure to support fund business with global scope,” he said. “It is clear that there is a collective effort to ensure Bermuda is appropriately aligned with the AIFMD, so that our funds sector can continue to operate from this jurisdiction successfully.”

BERMUDA REFINES DISCLOSURE REQU IREMENTS FOR COMPANY FORMATIONS

The Bermuda Monetary Authority (the Authority or BMA) announced that Bermuda is taking another step forward in its review and administrative procedures for company or partnership formations.

Specifically, there will be a refinement to the beneficial owner information companies must submit to the Authority as part of the formation process, and under exchange control requirements. 

 

Currently in the formation process, all entities must submit to the Authority a personal declaration form on beneficial owners of the partnership or company who own 5% or more of voting interests or rights.

Jeremy Cox, CEO of the BMA said, “This filing has been in effect for several years and the Authority has managed this process on behalf of the Government. The authorities in Bermuda have received further clarification on recent revisions to the international standard for identifying and disclosing information on beneficial owners, which has established the disclosure threshold at 10% or more of voting rights.”

“Bermuda was already well ahead in moving towards adopting this standard, the most recent example

being the Corporate Service Provider Act 2012 which took effect on 1 January 2013,” added Mr. Cox. “We are now in a position to apply this standard across the board in Bermuda. This means that the disclosure threshold will change and entities will now be required to provide personal declaration forms for persons who own or control 10% or more of voting rights in a company or partnership, rather than the previous 5% level.” 

 

Mr. Cox said that the new 10% threshold will also apply for companies that are subject to exchange

control seeking approvals from the BMA to transfer securities. “Under the Exchange Control Act 1972 the BMA is in fact the Controller and has to date reviewed all persons who own 5% or more of securities in these entities when they request securities transfer permissions,” he said. “The threshold will now also change to 10% for such requests.” 

 

“For persons submitting securities transfer requests who own less than 10% of an entity, the Authority will still provide approvals under its current general permission policy. So basically there is no change in this context for those who do not meet the revised threshold,” Mr. Cox stated. 

 

Mr. Cox advised that the policy shift from 5% to 10% will take effect immediately both for company formation applications and exchange control permissions.

Cayman Regulator Statement on AIFMD

The Cayman Islands Government passed an amendment on 15 March, 2013, which will allow the Cayman Islands Monetary Authority (CIMA) to enter into memoranda of understanding with its EU counterparts, using a model MoU developed by the European Securities Markets Authority (ESMA).

The amendment was a response to the European Union’s Alternative Investment Fund Managers Directive (AIFMD), which will require certain conditions to be met before non-EU countries can market alternative investment funds – such as hedge funds – in the EU.

Minister, the Hon. Rolston Anglin, who has responsibility for the Cayman Islands financial services sector, stated in the Legislative Assembly that the amendment was necessary to enable the continued marketing of Cayman Islands funds in the European market. The AIFMD is to be implemented across Europe from 22 July, 2013. With the amendment, Cayman is now compliant with the three AIFMD conditions that are of particular relevance to this jurisdiction. Since early 2012, CIMA has been in discussion with ESMA on the model requirements. The Authority has now taken all necessary steps to enable the signing of the agreement with ESMA and has indicated its ability and willingness to enter into cooperation agreements with the EU securities regulators based on the ESMA model MOU.

Guernsey Regulator Introduced Consultation on the Proposed Introduction of the AIFMD (Marketing) Rules, 2013

Guernsey Financial Services Commission introduced consultation paper is the first of two planned Commission consultations to facilitate the requirements of Directive 2011/61/EU on Alternative Investment Fund Managers (“the Directive”) into the local regulatory regime so as to enable regulated entities flexibility in their product strategy with respect to fund management and marketing business within the European Union or any state in the European Economic Area in which the Directive has been implemented.

Whilst recognising that some entities will fall outside the scope of the Directive, from July 2013, local entities will be permitted to market non-EU funds to investors in Member States through the Member States’ private placement regimes, as long as they fulfil certain transparency requirements and disclosures and regulatory co-operation arrangements are concluded between the Commission and the EU securities regulators in accordance with Article 42 of the Directive.

 

The AIFMD (Marketing) Rules, 2013 are proposed, to ensure that collective investment schemes and fund managers established in the Bailiwick of Guernsey who wish to market into the EEA meet the requirements of Articles 42 and 43 of the Directive. 

Please click here for the Consultation Paper; The AIFMD (Marketing) Rules, 2013 and Form AIFM.

ASEAN Regulators Implement Cross Border Securities Offering Standards

1 April 2013... The ASEAN Capital Markets Forum (ACMF) announced today that the securities regulators in Malaysia, Singapore and Thailand have implemented the ASEAN Disclosure Standards Scheme (Scheme) for multi - jurisdiction offerings of equity and plain debt securities in ASEAN. 

 

The Scheme aims to facilitate fund raising activities as well as to enhance the investment opportunities with in ASEAN capital markets.

 

Issuers offering equity and plain debt securities in multiple jurisdictions within ASEAN will only need to comply with one single set of disclosure standards for prospectuses, known as the ASEAN Disclosure Standards , bringing about greater efficiency and cost savings to issuers. 

 

The Scheme operates on an opt-in basis and ASEAN members will adopt the Scheme as and when they are ready to do so. Malaysia, Singapore and Thailand are the first three ASEAN jurisdictions to implement the Scheme.

 

The Scheme replaces the ASEAN and Plus Standards Scheme that was announced on 12 June 2009 and is one of the capital market initiatives undertaken by the ACMF as part of the regional capital market integration plan endorsed by the ASEAN Finance Ministers in April

2009 in Pattaya, Thailand. 

 

Mr. Lee Chuan Teck, Chairman of the ACMF and Assistant Managing Director of the Monetary Authority of Singapore, said “The implementation of the Scheme is another significant achievement in the ACMF’s continuing efforts to foster ASEAN capital market integration. With the Scheme in place, issuers will only need to prepare one set of prospectus for a multi-jurisdiction offering in the region. The ACMF hopes that this will encourage more companies to offer securities across ASEAN and help promote ASEAN as integrated capital market for fund-raising.”

 

“The initiative represents a significant milestone towards creating a more efficient environment for access to capital across the region, and is a key initiative by ASEAN capital market regulators to promote greater cross-border investment flows and grow the region’s capital markets. The fully harmonised disclosure standards will allow issuers more seamless access to financing opportunities within the region while facilitating investors’ decision making in multi-jurisdiction offerings,” said Ranjit Ajit Singh, Chairman of the Securities Commission Malaysia. 

 

“I am proud of this achievement. The arrival of the fully harmonized set of disclosure standards simply proved that ACMF is determined to make fund raising process most efficient for companies looking to expand their businesses. It creates more opportunity for ASEAN to channel our savings to promote growth of our own region. I hope that, in the near future, more ASEAN securities regulators will join Malaysia, Singapore and Thailand in adopting the ASEAN Disclosure Standards, yet enlarging the impact of this Scheme.” said Mr Vorapol Socatiyanurak, Secretary-General, the Securities and Exchange Commission, Thailand.

 

Further information on the Scheme is available in Appendix I. Details on the implementation of the Scheme can be found on the websites of the Securities Commission Malaysia ( www.sc.com.my), the Monetary Authority of Singapore (www.mas.gov.sg) and the Securities and Exchange Commission, Thailand (www.sec.or.th).