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).

New Zealand's Directors’ Guide Aimed at Sharpening Up Corporate Governance

The Financial Markets Authority (FMA) and the Institute of Directors in New Zealand (IoD) have released ‘A Director’s Guide’: a must-read for all current and aspiring directors.

The guide sets out the essentials of being an effective director and includes: questions to ask before you take up a directorship; decision making; legal requirements for signing off financial statements; and what you should do when things go wrong.

FMA CEO, Sean Hughes, said being a director is more than just a title and that ‘A Director’s Guide’ will help directors understand their obligations, particularly first time directors of small and medium-sized companies, and directors of family businesses.

“Being a director can be challenging but it can also be incredibly rewarding. This guide will act as a useful roadmap for directors to turn to,” said Mr Hughes.

“If directors keep their feet on the ground, and are alert to the risks and realities of what is happening around them, then they should feel confident that they are performing the most important duties and responsibilities of a director.”

IoD CEO, Ralph Chivers, said this guide is part of the IoD’s commitment to increasing the standard of governance in New Zealand. Good governance is ultimately a framework for making good decisions and this guide will assist aspiring directors to understand that framework.

“There is now and has always been a very high standard of care and diligence expected of directors, especially in matters relating to the management of other people’s money. Having the right knowledge and skill set to execute those responsibilities is essential for directors,” said Mr Chivers.

“It is also vital that directors are committed to on-going personal development to ensure that their knowledge and skills remain current and that they are doing the best job possible.”

A copy of ‘A Director’s Guide’ can be found here.

Bank of England News Release - Closure of Cyprus Popular Bank Public Co Ltd (Laiki Bank UK) and Transfer of All Deposits to Bank of Cyprus UK

Cyprus Popular Bank Public Co Ltd operating in the UK under the trading name ‘Laiki Bank UK’ has today reached an agreement with Bank of Cyprus UK Ltd to transfer all deposits to Bank of Cyprus UK, a UK subsidiary fully regulated by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) and covered by the UK Financial Services Compensation Scheme (FSCS) up to £85,000 per depositor.

The agreement does not affect access to bank accounts and therefore all customers who had an account with Laiki Bank UK will be able to access funds as normal and do not need to do anything.

Under the legal decree setting out the arrangements put in place by the Cypriot authorities a number of customers whose accounts are in overdraft will not be transferred to Bank of Cyprus UK. These accounts are now frozen at Laiki Bank UK and customers in overdraft will no longer have banking facilities at Laiki Bank UK. Customers in overdraft will need to contact Laiki Bank UK if they have any questions about what this means for them. Customers who had an overdraft facility but were in credit need to be aware that this facility has been cancelled. They will need to contact Bank of Cyprus UK if they want to apply for a new overdraft facility.

Additionally, mortgages and loans that customers have will not be transferred to Bank of Cyprus UK. These services have been transferred to the Bank of Cyprus, Cyprus and customers will be contacted directly in due course. However, customers should continue to make repayments as normal.

 

All other deposits, such as current accounts, will transfer to Bank of Cyprus UK. For further information customers should contact Bank of Cyprus UK.

 

Existing customers of Bank of Cyprus UK have not been impacted by the measures outlined above and the firm continues to operate as normal.  

 

Notes

1.  Until today, there were two Cypriot banks operating in the UK:

a)     Cyprus Popular Bank Public Co Ltd (CPB) which operated in the UK under the trading name ‘Laiki Bank UK’ as the UK branch of an EEA bank under the European Banking Consolidation Directive.  The Central Bank of Cyprus was the home state regulator of this firm, not the UK authorities.  As is the case with other EEA operations customers were covered by the home state deposit guarantee scheme up to 100,000 Euros per eligible depositor.

b)    Bank of Cyprus Public Limited Company operates in the UK through its subsidiary  Bank of Cyprus UK Limited (Bank of Cyprus UK) which is incorporated in the UK and fully regulated by the PRA and FCA.  Eligible deposits with the Bank of Cyprus UK are covered by the Financial Services Compensation Scheme (FSCS) up to £85,000 per eligible depositor and £170,000 for joint accounts.

 

2.  Details regarding the UK Financial Services Compensation Scheme (FSCS) are available on the FSCS website

 

3.  On 1 April 2013 the Prudential Regulation Authority (PRA) became responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms. In total the PRA regulates around 1,700 financial firms.

 

The PRA’s role is defined in terms of two statutory objectives to promote the safety and soundness of these firms and, specifically for insurers, to contribute to the securing of an appropriate degree of protection for policyholders.

 

The PRA was created by the Financial Services Act (2012) and will be part of the Bank of England.

4.  On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of 26,000 financial firms. The FCA is responsible for promoting effective competition, ensuring that relevant markets function well, and for the conduct regulation of all financial services firms. This includes acting to prevent market abuse and ensuring that consumers get a fair deal from financial firms. The FCA operates the prudential regulation of those financial services firms not supervised by the PRA, such as asset managers and independent financial advisers.

The FCA was created by the Financial Services Act (2012).

Reserve Bank of India states Core Investment Companies – Guidelines on Investment in Insurance

At present NBFCs venturing into insurance are guided by the circular DNBS(PD).CC.No.13/02.01/99-2000 dated June 30, 2000 on amendment to NBFC Regulations which contains the ‘Guidelines for entry of NBFCs into Insurance’. In view of the unique business model of Core Investment Companies (CICs), Reserve Bank of India (RBI) has decided to issue a separate set of guidelines for their entry into insurance business.

While the eligibility criteria, in general, are similar to that for other NBFCs, no ceiling is being stipulated for CICs in their investment in an insurance joint venture. Further it is clarified that CICs cannot undertake insurance agency business. The Guidelines are enclosed for meticulous compliance.

CICs exempted from registration with RBI do not require prior approval provided they fulfil all the necessary conditions of exemption as provided under/ in CC No.206 dated January 05, 2011. Their investment in insurance joint venture would be guided by IRDA norms.

Guidelines for Entry of CICs into Insurance

1. Any Core Investment Company (CIC) registered with RBI which satisfies the eligibility criteria given below will be permitted to set up a joint venture company for undertaking insurance business with risk participation, subject to safeguards. The maximum equity contribution such a CIC can hold in the joint venture company will be as per IRDA approval.

2. The eligibility criteria for joint venture participant will be as under, as per the latest available audited balance sheet.

1. The owned funds of the CICshall not be less than Rs. 500 crore;
   
2. The level of net non-performing assets shall be not more than 1% of the total advances;
   
3. TheCIC should have registered netprofit continuously for three consecutive years;
   
4. The track record of the performance of the subsidiaries, if any, of the concerned CIC should be satisfactory;
   
5. The CIC shall comply with all applicable regulations including CIC Directions, 2011. Thus CICs-ND-SI are required to maintain adjusted net worth which shall be not less than 30% of aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items.
   

3. No CIC would be allowed to conduct such business departmentally. Further, an NBFC (in its group / outside the group) would normally not be allowed to join an insurance company on risk participation basis and hence should not provide direct or indirect financial support to the insurance venture.

4. Within the group, CICs may be permitted to invest up to 100% of the equity of the insurance company either on a solo basis or in joint venture with other non-financial entities in the group. This would ensure that only the CIC either on a solo basis or in a joint venture with the group company is exposed to insurance risk and the NBFC within the group is ring-fenced from such risk.

5.In case where a foreign partner contributes 26 per cent of the equity with the approval of insurance Regulatory and Development Authority/Foreign Investment Promotion Board, more than one CIC may be allowed to participate in the equity of the insurance joint venture. As such participants will also assume insurance risk, onlythose CICs which satisfy the criteria given in paragraph 2 above, would be eligible.

6. CICs cannot enter into insurance business as agents. CICs that wish to participate in insurance business as investors or on risk participation basis will be required to obtain prior approval of the Reserve Bank. The Reserve Bank will give permission on case to case basis keeping in view all relevant factors. It should be ensured that risks involved in insurance business do not get transferred to the CIC.

Notes:

1. Holding of equity by a promoter CIC in an insurance company or investment in insurance business will be subject to compliance with any rules and regulations laid down by the IRDA/Central Government. This will include compliance with Section 6AA of the Insurance Act as amended by the IRDA Act, 1999, for divestment of equity in excess of 26 per cent of the paid up capital within a prescribed period of time.
   
2. CICs exempted from registration with RBI in terms of the Core Investment Companies(Reserve Bank) Directions, 2011 do not require prior approval provided they fulfil all the necessary conditions of exemption.

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Reserve Bank of India Clarifies Rules for Overseas Direct Investment

Attention of the Authorised Dealers (AD) is invited to Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 notified by the Reserve Bank vide Notification No. FEMA 120/RB-2004 dated July 07, 2004 and as amended from time to time.

It has been observed that eligible Indian parties are using overseas direct investments (ODI) automatic route to set up certain structures facilitating trading in currencies, securities and commodities. It has come to the notice of the Reserve Bank that such structures having equity participation of Indian parties have also started offering financial products linked to Indian Rupee (e.g. non-deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to Indian market, etc.). It is clarified that any overseas entity having equity participation directly / indirectly shall not offer such products without the specific approval of the Reserve Bank of India given that currently Indian Rupee is not fully convertible and such products could have implications for the exchange rate management of the country. Any incidence of such product facilitation would be treated as a contravention of the extant FEMA regulations and would consequently attract action under the relevant provisions of FEMA, 1999.

AD - Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned.