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New European legal framework, offshore passports in issue, Benoit de
la Chapelle-Bizot, Financial Counselor, Head of the French
Government’s Economic and Finance Department, and France’s
Permanent Representative to the European Union, presents an update on recent regulatory developments relating to investment funds
To provide a global overview of the progress achieved by different initiatives across Europe and to debate on the steps ahead, SGSS recently held a seminar on European financial services infrastructure. The challenge of presenting an update on recent regulatory
developments was taken up by Benoit de la Chapelle-Bizot
Framework complete, but…
He confirmed to the audience that the new European legal framework
for Alternative Investment Funds (AIFs) is complete. But he added that
25 of the 27 current EU member states are against the granting of a
passport to authorise offshore fund managers to trade their funds
within the EU, unless several conditions are met. One, there must be
an appropriate co-operation agreement between the authorities of
any individual member state and the relevant offshore location. Two,
appropriate anti-money-laundering measures must be in place. Three,
the fund manager’s country of location must comply with OECD tax
standards.
2015: offshore passports in issue
Subject to these conditions being met, and subject to assessment by
ESMA, passports will begin being granted to offshore funds in 2015.
Meanwhile, he added that the AIFMD is presenting a separate
challenge: “that of drafting 100 measures of execution”. Further
negotiations are needed with member states, ESMA and the industry
itself, he said. “There are a lot of loopholes and a number of
difficulties. Some compromise and ambiguity lies ahead.”
A consensus complicating the picture is the lack of empowerment of
European authorities. “For EMIR we’ll have exactly the same
difficulties,” he said. “And what will be the emergency powers of
ESMA? Moreover, it is really difficult to negotiate a European regime
without knowing all the possible consequences of the Dodd-Frank
act. The AIFMD was mapped out without a full awareness of the
impact of Dodd-Frank. There will be a strong political debate around
these issues. We need to have a decision and we hope the industry
will help to defend European interests.”
The evolution of asset managers and their industry was a focus of
attention in the wide-ranging round table discussion that followed
Benoit de la Chapelle-Bizot’s address. Nicolas Gonzalez, Head of
Product Development at SGSS, suggested that the extent of any
evolution would depend upon how asset managers leverage the new
opportunities that will open up for them under UCITS IV, especially in
relation to distribution. “Master-feeder structures are the new
distribution tool and their adoption should accelerate existing trends,”
he observed. He added that a good deal of work needs to be done
to provide support in the middle office and in fund administration.
“There will be a need to invest in these functions and when establishing relationships with third-party providers we will need to be
certain that those providers can accompany us on the new
distribution journey.”
Returning to the theme of the AIFMD, Alain Pithon, Deputy Managing
Director of the French Asset Management Association, added that it
is too early to say how fund managers will react to the eventual new
regime. Several questions face fund managers, he said. “This is a
question about strategy rather than about organisation. We need to
establish what we want to do. What tools are available to asset
managers? How do we address the new competition for offshore
funds? After many years of unending discussion competition is beginning aggressively.”
Against this backdrop, optimism is higher in Luxembourg about its
prospects in the new landscape than 12-18 months ago, asserted Pascal Berichel, Head of Fund Distribution Services at SGSS. “A year ago
people were expecting a huge UCITS IV earthquake, but we don’t now expect widespread mergers between funds, and Luxembourg will probably increase its 30% market share.” The governance of infrastructure remains a key question, he added. If the planned new Luxembourg CSD initiative is successful in replacing transfer agencies,
there is a risk that as a monopoly it could charge
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