1

FUND NEWS
January 2013
Investment Fund Regulatory and Tax developments in
selected jurisdictions
Issue 99 – Regulatory and Tax
Developments in January 2013 Regulatory Content
European Union
Regulatory & implementing technical
standards for OTC derivatives,
CCPs & trade repositories
Page 1

ESMA Q&A Short selling and certain
aspects of credit default swaps
Page 2

Tougher credit rating rules voted
by European Parliament Page 2

ESMA approves co-operation
agreement with Brazilian regulator
Page 2 Luxembourg
New status for Advisers of UCIs
and SIFs

Unauthorised Unit Trusts Page 9

USA
FATCA Final Regulations released Page 10

Fund News – January 2013

2 ESMA Q&A on Implementation of the
Regulation on short selling and
certain aspects of credit default
swaps
On 30 January 2013 the European
Securities and Markets Authority
(ESMA) issued a second update of its
Questions and Answers paper (Ref:
ESMA/2013/159) on the practical
implementation of the Regulation on
short selling and credit default swaps
which is available via the following
link:

Tougher credit rating rules voted by
European Parliament
In a Press Release dated 16 January
2013 the European Parliament advised
that in the plenary session of the same
day, new rules were voted on credit

or member holding 10 % of the voting
rights in that agency has invested in the
rated entity. The new rules will also
bar anyone from simultaneously holding
stakes of more than 5% in more than
one credit rating agency, unless the
agencies concerned belong to the same
group. ESMA approves co-operations
agreements with Brazilian regulator
The European Securities and Markets
Authority (ESMA) approved the co-
operation arrangements between the
Brazilian Comissão de Valores
Mobiliários (CVM) and the EU securities
regulators for the supervision of
alternative investment funds (AIFs). The
co-operation arrangements include the
exchange of information, cross-border
on-site visits and mutual assistance in
the enforcement of the respective
supervisory laws. This co-operation will
apply to Brazilian alternative investment
fund managers (AIFMs) that manage or
market AIFs in the EU and to EU AIFMs
that manage or market AIFs in Brazil.
Law on the financial sector and they will
have to apply for authorisation under
Article 24 of that law. The authorisation
will be granted by the Minister of
Finance.
Each Luxembourg based investment
adviser of UCIs or SIFs exercising the
activity at the time of the entry into force
of the Law of 21 December 2012 has
until 30 June 2013 at the latest to
comply with the requirements of Article
24 of the Law on the financial sector.
The entity must contact the CSSF by
email (), before 1
March 2013 in order to ensure that the
application can be dealt with within the
legal delay.
The full text (in French) is available via
the following web
link:


types of OTC derivatives you trade?
Will you access clearing directly as a
‘clearing member’? If not, you will
need to be a client of a clearing
member.
• Are your existing systems and
processes adequate to implement
the new operational risk mitigation
requirements set out in EMIR?
• Do you have collateral agreements
in place and sufficient collateral
available to collateralise non-cleared
OTC derivative trades?
The Circular is available on
www.cssf.lu
Fund News – January 2013

4 CSSF Anti-money laundering
Regulation 12-02
The CSSF Regulation 12-02 of 14
December 2012 on the fight against
money laundering and terrorist financing
has been published on 9 January 2013.
Its purpose is first to respond to the

principles applicable to the cross-border
correspondent banking relationships or
other similar relationships with
institutions in Third Countries. As such
professionals should gather sufficient
information to be in a position to
determine the reputation of the
intermediary, the quality of supervision,
as well as to assess its AML/CTF
measures and controls. This information
should enable the professionals to
assign a level of risk to this intermediary
and determine the level of due diligence
to apply.
Chapter 3: Risk Based Approach
According to articles 4 and 5 of the
Regulation and as stipulated by article
3(3) of the modified Law of 12
November 2004, ‘professionals are
required to perform an analysis of the
risks inherent to their business activities’
taking into consideration the risks linked
to the nature of their customers, the
offered products and provided services.
Professionals should set down the
outcomes of this analysis in writing and
be in a position to communicate this
analysis to the CSSF.
As such, professionals should assess
and categorise their customers

outcomes of such assessment should
be reviewed and updated on a regular
basis.
Chapter 4: Customer due diligence
procedures
Beneficial owner
The obligation to identify the customer
and verify its identity includes the
identification of the beneficial owner and
the fact that professionals should take all
reasonable measures and use relevant
information or data obtained from a
reliable source to verify properly the
identity of the beneficial owner. Art 17
of the Regulation indicates that
professionals should obtain a written
declaration from the customer whether
he is acting or not for his own account.
The customer will need to agree to
inform the professional about any
change in the beneficial ownership.
There is nevertheless no longer a
reference to the former declaration of
beneficial owner signed by the beneficial
owner itself that was recommended by
Fund News – January 2013

5
operational point of view.
UK
Progress in transposing the AIFMD
into UK law
On 11 January 2013, HM Treasury
(“HMT”) published its first Consultation
Paper on the “Transposition of the
Alternative Investment Fund Managers
Directive” (“AIFMD”). This is the first of
two consultations planned by HMT. The
second consultation, to be published
later in quarter one of 2013, will include
guidance on:
• scope of application of the Directive,
including charity funds; the
European Venture Capital Funds
(“EuVECA”) and European Social
Entrepreneurship Funds (“EuSEF”)
Regulations;
• marketing of EEA retail funds, third
country retail funds, and Financial
Services and Markets Act 2000
Section 270 and 272 funds;
• application of the approved persons
regime to internally managed
investment companies; and
• application of the Financial Services
Compensation Scheme and
Financial Ombudsman Service to
AIFM.

requirements such as
reporting data to the
regulator on leverage;
and
iii) the remuneration
provisions and
disclosure
requirements of the
Directive.
However, all other aspects of the
Directive are to apply including the
regulatory capital and conduct of
business rules.
Additionally some firms will need to
comply with special provisions in regard
to the de minimis threshold (€100m),
Fund News – January 2013

6 such as:
• Private Equity firms, are only in
scope of the Directive if they are
managing AUM of more than
€100m.
• Internally-managed funds, such as
Investment Trusts, will need to
apply for a registration even if the
assets are under €100m AUM. The

which will determine the activities they
can undertake.
HMT do not intend to make the private
placement third country manager
requirements greater than the Directive
minimum, until the private placement
regime is reviewed in 2015.
This consultation and the Commission’s
Regulations issued in December have
triggered an intensive period of
implementation activity.
Notwithstanding the short period
remaining, it is clear that the UK will
impose compliance from July 2013 and,
for UK AIFMs, will not allow the
transition to full compliance to go
beyond July 2014.
The deadline for responding to this
consultation is 27 February 2013. The
consultation paper (134 pages) is
available via this web
link:

International
IOSCO Publishes Suitability
Requirements for Distribution of
Complex Financial Products
The International Organisation of
Securities Commissions (IOSCO)
published a final report on ‘Suitability

members.
The report is available via the following
web
link:
Fund News – January 2013

7 Tax News
European Union
Council agreement on enhanced
cooperation for Financial Transaction
Tax
On 22 January 2013 the European
Council adopted a decision authorising
11 Member States to proceed with the
introduction of a financial transaction tax
(FTT) through enhanced cooperation.
The proposal on the FTT is expected
within the coming weeks.

to 25% and abolition of
grandfathering
So far, the exit tax regime came into
operation only in respect of collective
investment institutions that were
invested, directly or indirectly, for more
than 40% of their assets in debt claims.
This threshold for investment in debt
claims has now been brought down
from 40% to 25%. This brings the
Belgian exit tax regime again in line with
the EU Savings Directive, which has
provided for the 25% threshold since 1
January 2011.
Moreover, the grandfathering clause in
Belgian law for debt claims that prior to
1 January 2011 did not fall within the
scope of the Savings Directive is now
abolished, thereby reflecting the earlier
abolition of the grandfathering clause in
the EU Savings Directive.
Broadening of scope to cover
secondary transactions
Whilst the exit tax regime was triggered
so far only by the redemption of shares
or the (partial or total) liquidation, the
amended regime applies also on the
occurrence of secondary transactions,
i.e. the transfer of shares or units.
Exclusion of investment entities

gains in their personal income tax return. Fund News – January 2013

8 Germany
Draft Investment Tax Act
On 30 January 2013, the German
Government circulated a government
draft version of the new Investment Tax
Act.
The proposed changes could in particular
affect German investors in foreign
hedge funds and private equity funds
qualifying as non-UCITS funds, much
less investors in UCITS funds. The
updated draft contains inter alia a couple
of amendments that can be regarded as
advantages for those funds.
1. Non-UCITS funds, qualifying as an
open-ended alternative investment
funds (AIF)
− Under the draft a non-UCITS
has to fulfill specific

loans exceeding 30% of the
fund’s assets,
• the restriction to invest in
specific eligible assets only
(e.g. securities, money market
instruments, derivatives, bank
loans, precious metals,
unsecuritised loan receivables if
its market value can be
determined),
• Up to 10% may be invested in
non-eligible assets,
• Investment invest in trade
fixture and public private
partnerships (ÖPP) under
certain circumstances.
• The restriction, that
participations in the same
corporation must not exceed
5% of the fund’s assets, has
been cancelled.
− The grandfathering rule has been
taken over from the initial draft. A
grandfathering will be granted for
the benefit of funds established
before 22 July 2013. A
grandfathered fund will continue to
be treated as investment fund for
tax purposes, even if it no longer
meets the requirements under the

European Economic Area and is
subject to an income taxation (i.e.
not tax exempt).
− Please note, that the rules with
respect to foreign investment
companies comparable with the
legal form of a German
“Sondervermögen” (e.g. a
Luxembourg FCP or a French FCPR)
not qualifying as an AIF, have been
taken over from the initial draft. This
means that these foreign
investment companies are deemed
to constitute a corporate body
within the meaning of § 2 No. 1 of
the German Corporation Tax Act and
will be therefore subject to limited
tax liability with its German source
Fund News – January 2013

9 income. Unfortunately no
grandfathering will be granted for
existing fund structures. For
investment structures, however,
previously neither taxed according
to the Investment Tax Act nor the
Foreign Tax Act, thus subject to the

Funds”). While the investment and
borrowing capabilities of Authorised
Funds (UCITS; Non-UCITS Retail
Schemes; and Qualified Investor
Schemes) have, overall, a substantial
capacity for diversity of investments,
they are required to deliver features that
are not required of UUTs.
UUTs may carry out activities; have
operational features; and operate with
investment assets beyond the scope
permitted for Authorised Funds. An
example would be property
development. Such aspects are not
addressed by the AF SORP and
preparers of UUT financial statements
and the UUT’s auditors may have to
interpret the required accounting from
the principles in the AF SORP rather
than by reference to specific guidance in
the AF SORP.
The new draft guidance does not offer
additional advice for UUTs on this and so
it may present additional challenges and
result in a wider variation in
interpretations when UUTs prepare
financial statements.

in March 2010, Treasury and the IRS
have issued several rounds of
preliminary guidance, including proposed
regulations. The recently released final
regulations have been much anticipated
by taxpayers that expect to be affected
by the new FATCA withholding and
reporting regime, particularly in light of
the looming January 1, 2014, effective
date.
Several of the key provisions are listed
below:
• Harmonisation with
intergovernmental agreements
• Relaxation of certain documentation
and due diligence requirements
• An expanded scope of
“grandfathered obligations”
• Liberalisation of requirements for
certain retirement funds and savings
accounts
• Limited FFIs – continued transition
rule
• Bearer shares
• Brokers (delivery vs. payments)
• Registration process

The KPMG analysis of the FATCA final
regulations is available via the following
web

Tax
Georges Bock
Partner
T: + 352 22 5151 5522

E:
Advisory
Vincent Heymans
Partner
T: +352 22 5151 7917
E:
Charles Muller
Partner
T: +352 22 5151 7950
E:


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