leading edge conference series 13 July 2010 - · PDF fileshare with you an ALFI TASC driven Distributor Satisfaction Survey with a live debate with ... FATCA, AIFMD, AML/KYC conflict

leading edge conference series13 July 2010

Breakfast kindly sponsored by

Refreshment break kindly sponsored by

Lunch kindly sponsored by


Cocktail reception kindly sponsored by

Voting system kindly sponsored by

TA Forum 2013 pack kindly sponsored by

Still swimming in a seaof regulatory and industry

developments…

Welcome to the ALFI TA & Distribution Forum 2013

Still swimming in a sea of regulatory and industry developments...

Since we launched the Luxembourg TA & Distribution Forum community in 1999, this is actually the 14th year that we hold a yearly TA Forum in Luxembourg. I want to firstly, Thank You All, for keeping this important community going strong.

In light of the turbulent times we are all facing and going through in our beloved fund industry, it is an opportune time to get back to basics, back to where we started from, 14 years ago, when we held our very first Luxembourg TA & Distribution Forum which was, basically:

To bring together industry peers to share experiences and discuss issues related to global fund distribution operations, specifically those topics affecting

Global Transfer Agency and Global Distribution Support Services.

During this year’s TA Forum, we will aim to do just that.

We will consider the influence that key regulatory and industry events have on the way we conduct TA and Distribution SupportServices’ business and how we are shaping and developing capabilities to be ready and aligned with the ever changing face of the global fund industry.

We will openly discuss, how Luxembourg fund industry players are dedicated to ensure the ease of doing business in Luxembourg-domiciled funds amidst the sea of regulatory impacts and industry developments affecting us all today.

Welcome to the ALFI TA & Distribution Forum 2013

The morning will cover dedicated FOCUS sessions on the Luxembourg fund industry, the Global Distribution landscape, theRegulatory developments impacting Global TA and Distribution Support Services from now to…, and, last but not least, we willshare with you an ALFI TASC driven Distributor Satisfaction Survey with a live debate with Distributors on the topic of DistributionSupport Services.

The afternoon will highlight how we Support and Deliver the message in a bottle and provide an opportunity for allparticipants to share their views. The afternoon sessions will be set in 2 consecutive breakout sessions, splitting up into smallergroups to foster open question and answer sessions on 2 key themes:

1) Hot Off the TA Regulatory Press!2) Distribution Operations & Infrastructure Developments

I would like to take this opportunity to specially thank the ALFI TA Steering Committee (“TASC”) members and their respectiveorganisations for their commitment in making this yearly event happen. Most importantly, I extend my gratitude for the work athand and key deliverables undertaken by the ALFI TASC working groups to enable the ease of doing business in Luxembourg-domiciled funds in support of the interests of the asset managers, asset servicers and related service providers of theLuxembourg fund industry.

On behalf of all of us TASC members, we trust that we have put together an interesting programme for you and hope that you willbenefit from the ALFI TA & Distribution Forum 2013.

We are honoured that you will enjoy with us, this yearly summit bringing together the fund industry’s operational practitioners.

Finally, a big thank you to ALFI for the venue, the ALFI events team for supporting us throughout the day, and the ALFI TASCsponsors for the day’s catering and the logistics of the day.

With kind regards to all participants,

JoséeJosée DenisChairman, ALFI TA & Distribution Forum

Welcome & Introduction

François DrazdikSenior Industry Affairs Adviser

ALFI

Welcome & Introduction

Josée Lynda DenisCEO Luxembourg,

Head of Depository BankStandard Chartered Bank Luxembourg

Morning programme – FOCUS on the industry today8:30 - 9:00 Registration & breakfast

9:00 - 9:30 Welcome & Introduction• Update on ALFI and the Luxembourg Fund Industry• Introduction of the day‘s agenda with an ALFI TASC 2012/2013 update

Francois Drazdik, Senior Industry Affairs Adviser, ALFIJosée-Lynda Denis, CEO, Standard Chartered Bank - Luxembourg Branch

9:30 - 10:30 An update on Global Distribution trends• Deep dive into the impact of AIFMD - Will AIFs change the landscape of the Luxembourg Fund industry? An interview

with AIF Managers

Moderator: Christophe Saint-Mard, Partner, PwCInterviewees: Daniela Klasèn-Martin, Managing Director, Crestbridge

Enrico Turchi, Managing Director, Pioneer Asset Management

10:30 - 11:00 Coffee Break

11:00 - 11:30 Focus on Distribution Support ~ A live Distributor Survey• The voice of the Distributor – a roundtable discussion with Distributors

Moderator: Raymond Groen in ‘t Woud, Vice President, BNY MellonEuropean TA – Business Support & Strategy

Panelists: Richard Lepère, Managing Director, FundChannelSven Gräbedünkel, BHF Bank, Fund Execution platform

11:30 -12:30 Regulatory Focus • The sea of regulatory impacts to the Luxembourg fund industry• An update on the latest AML/KYC regulatory developments

Xavier Balthazar, Partner, PwC Marco Zwick, Head of Compliance and Risk, Continental Europe and Middle East, Schroder Investment Management, Luxembourg

12:30 - 14:00 Buffet Lunch

Afternoon programme – Delivering the message in a bottle…14:00 - 15:00 Workshop 1 (in parallel to Workshop 2)

Hot off the TA Regulatory Press!• AIFMD and the impact to TA and Distribution• A FATCA Update

Moderator: Gudrun Goebel, COO Cross Border Fund Processing Services, Société Générale Securities Services Luxembourg

Panelists: Sue Lee, Head of Process and Quality Governance, Global Distribution Support and Transfer Agency Services,HSBC Securities Services Pierre Mottion, Global Head of Transfer Agent and Fund Dealing Products, BNP Paribas Securities Services, Luxembourg

14:00 - 15:00 Workshop 2 (in parallel to Workshop 1)

Distribution Operations & Infrastructure Developments• Standardisation – where do we stand today?• Infrastructure developments: migration update and ISO20022 benefits brought forward

Panel discussion: « What’s next? Or how the current industry changes would affect the landscape in 5 years from now… »

Moderator: Valérie Letellier, Market Manager, Funds, SWIFT

Panelists: Sophie Thibeau, Director, Product Management-Funds, EuroclearJames Bolton, Executive Director, EMEA Transfer Agency & Distribution Support, JP MorganOlivier Portenseigne, CCO, FundSquareRaphael Machet, Global Product Manager Fund Dealing Services, BNP Paribas Securities Services Luxembourg


15:30 - 16:30 Workshop 1 and 2 will be repeated.

To foster open question & answer sessions, the afternoon sessions are set in 2 consecutive breakout sessions, splitting up the number of participants into smaller groups.

16:30- 16:45 Chairperson’s closing remarks

16:45 - 18:30 Closing cocktail

Update on the ALFI TA & Distribution Forum

ALFI TA & Distribution Forum today

Chairperson Josée-Lynda DenisALFI Coordinator François DrazdikBNP Paribas Securities Services Pierre MottionBNY Mellon Raymond Groen in ‘t Woud CACEIS Investor Services Laurent Majchrzak – Jerome VaroquiCiti Mathew Newnham Clearstream Stéphane PallottaEuroclear Sophie Thibeau – Lieven LibbrechtFundSquare Olivier PortenseigneHSBC Securities Services Sue Lee – Valérie HesseJP Morgan James BoltonKNEIP Communication Mario MantrisiLemanik Asset Management Steve BernatPricewaterhouseCoopers François GénauxRBC Investor Services Gilles Moreau - Beppe MalinverniSchroders Investment Management Gary JanawaySociété Générale Securities Services Gudrun GoebelState Street Bank / IFDS Junead Kabir – Jan DemarestS.W.I.F.T. Valérie LetellierVictor Buck Services Edith Magyarics - Jean-François Valette

TA Forum Steering Committee “TASC”SOUNDING BOARD

The Luxembourg TA & Distribution Forum

(launched in 1999)146 participants93 organisations24 nationalities

Across 14 countries/regions

The ALFI TA & Distribution Forum

Asia

TA & Distribution Forum structure

TA & Distribution Forum

TA Forum Steering Committee

TA Operations WG

1. Standardisation

2. Distribution Support Services

3. TA Regulatory

Communication WG

1. Marketing & Communication

Articles

2. Events

Luxembourg TA & Distribution Forum

3. Industry Associations: Building Bridges

4. Luxembourg Fund Infrastructure

ALFI/HKIFA Cooperation Agreement

ALFI TASC Asia

5. TA Survey 2013

Operations WG

TA Operations WG

1. Standardisation WG Chair: Valérie Letellier

– WG representatives: Sophie Thibeau, Natascha Hector-Weertz, Olivier Portenseigne, Jean-François Valette, Jérome Varoqui, CR Boniver (ALMUS, Findel), Gary Janaway (Chairman Findel Group)

2. Global Distribution Support WG Chairs: Steve Bernat, Raymond Groen

– WG representatives: Josée Denis, Laurent Majchrzak, James Bolton, Junead Kabir, James Bolton

3. TA Regulatory WG Chair: Pierre Mottion

– James Bolton, Gudrun Goebel , Valerie Hesse, Beppe Malinverni

4. Luxembourg Fund Infrastructure WG Chair: Gary Janaway

– WG representatives: WG representatives: Gudrun Goebel , Carlo Matagne (Luxbg T2S NUG), Kathy Shackle (Fidelity)

5. TA Survey 2013 WG Chairs: Josée Denis, François Génaux

– WG representatives: Marco Bretz (PwC)

1. Standardisation WG Luxembourg Standardisation Market Group KTF initiative SWIFT/EFAMA Standardisation Survey October 2013 Corporate Actions for Funds: White Paper

2. Global Distribution Support WG Distributor Survey 2013 KYD

ALFI TASC Luxembourg – 2013/2014 Roadmap

3. Regulatory Impacts TASC WGs feeding into related ALFI Committees Position Paper 4Q2013: AIMFD treatment of subscriptions and

redemptions FATCA Q&A ALFI/ALCO AML Recommendations Outsourcing re: CSSF circular 12.552 Dematerialisation of fund shares

4. Infrastructure WG T2S For Funds Fund market infrastructures

5. Luxembourg TA Survey 2013 14 participants


6. Events

ALFI TA & Distribution Forum 2013 – 14 November 2013

ALFI Asia Roadshow 2013, 4 and 5 December 2013 in Singapore and Hong Kong - Presentation and panel discussion on

“Cross-border Asset Servicing– Building bridges between Asia and Luxembourg”


Mission statement & objectives

Initiatives status update

ALFI TASC Asia – 2013/2014 Roadmap

Mission statement: Ensure continuity of the ALFI TA & Distribution Asia while Ching is on

maternity leave

Objectives & scope: focus on deliverable(s) that can be achieved in this timeframe and that

could provide value to community in Asia

Mission statement & objectives

ALFI TA & Distribution Forum Asia

Chaiperson Marco Attilio (SWIFT Asia)ALFI Hong Kong – Coordinator Ching Yng ChoiAllen & Overy Hong KongBBH Hong KongBNP Paribas Securities Services SingaporeCACEIS Hong KongClearstream Hong KongEuroclear Hong KongHSBC Securities Services Hong KongStandard Chartered Bank Singapore and Hong KongS.W.I.F.T. Singapore and Hong Kong

TA Forum Steering Committee “TASC”

SOUNDING BOARD

The ALFI TA & Distribution Forum

Luxembourg

1. Regulation WG (leaders: BNP Paribas, Euroclear) The focus would be on how global or local regulations will impact our industry

(TAs, distributors, iCSDs, and other stakeholders) Focused jurisdictions are: Hong Kong, Singapore, Taiwan, Japan, South

Korea and in a second stage, Mainland China, Australia, Thailand, Malaysia, Vietnam, Indonesia.

Suggested topics are: FATCA, AIFMD, AML/KYC conflict of interest, role of the depositary bank (UCITS IV), progress made on UCITS VI.

2. Operations WG (leader: SWIFT) The group would like to document the market dynamics and statistics for the

funds industry to act as a knowledge base for our industry.

3. Education WG (on hold) Annual/bi-annual distributor’s forum or breakfast seminar

Initiatives status update

FOCUS on

Global Distribution Trends

Moderator/Interviewer: Christophe Saint-Mard, Partner, PwCInterviewees: Daniela Klasèn-Martin , Managing Director,

CrestbridgeEnrico Turchi, Managing Director, Pioneer Asset Management

Agenda

Global Distribution Trends

AIFMD• The marketing passport• AIFMD benefits• Market access options: Passport or Private placement

Deep Dive into the impact of AIFMD - Will AIFMD change the landscape of the Luxembourg fund industry?

Distribution Trends

* 92% of true cross-border funds are UCITS

Over 3,000

1,000 – 2,999

500 – 999

100 – 499

Less than 100

No. cross-border funds registered for sale 6/2013

Regions for Cross-Border DistributionSuccessful distribution of cross-border funds*

3 2603 750

4 529 4 875 5 1705 907

6 5257 366 7 441

7 9078 511

9 436 9 517

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Jun- 2013

Luxembourg Ireland UK France Germany Other Number of truex-border funds

Num

ber of cross-border funds

Num

ber o

f cro

ss-b

orde

r reg

istra

tions

Average registrations per true cross-border fund

7.0 7.2 5.7 5.8 7.0 7.3 7.6 7.7 7.9 7.9 7.7 7.7 7.8

Source: Lipper LIM and PwC analysis, June 30, 2013.

Evolution of cross-border distributionNumber of cross-border funds & registrations

1 250,9

1 783,8 1 738,9

2 124,3

2 613,9

0

500

1 000

1 500

2 000

2 500

3 000

2005 2007 2009 2011 juin-13

AuM* of cross border funds (€ billion)

Source: Lipper LIM and PwC analysis, June 30, 2013. * Estimation based on Lipper LIM data.

Evolution of cross-border distribution

322347

400425

460 463491

0

100

200

300

400

500

600

2007 2008 2009 2010 2011 2012 juin-13

Source: Lipper LIM and PwC analysis, June 30, 2013.

Num

ber o

f gro

ups

Number of cross-border management groups

Cross-border asset management groups

• 12% growth in cross-border funds since Jan 2012 – but only 1% in 6 months to 30 June 2013;

• 11% growth in registrations for distribution since Jan 2012 – but only 2% in 6 months to 30 June 2013;

• AuM in cross-border funds 52% higher since the GFC – 23% AuM growthin past 2 years;

• 100% growth since 2006 in the number of managers with cross-border funds.

Evolution of cross-border distributionSome takeaways

Hotspot markets – top new registrations 6 months to 30 June 2013

Country New registrations in 2013

Total number of registrations

2013Norway 282 +14.5%Cyprus 212 +96.4%Sweden 207 +6.2%Finland 173 +6.3%France 162 +3.7%Malta 160 +118.5%

Source: Lipper LIM and PWC analysis, data as at June 30, 2013.

Country New registrations in

2013

Evolution in the total number of registrations

2013 2012Norway 282 +14.5% +16%Cyprus 212 +96.4% +6%Sweden 207 +6.2% +9%Finland 173 +6.3% +8%France 162 +3.7% +13%Malta 160 +118.5% -2%

Hotspot markets – top new registrations 6 months to 30 June 2013


Hotspot markets – Decline in registrations 6 months to 30 June 2013

Country Decline in registrations in 2013

Total number of registrations

2013UK -166 -3.3%

Switzerland -98 -1.8%Taiwan -79 -9.1%

Hong Kong -21 -1.7%Chile -105 -8.2%


Country Decline in registrations in

2013

Evolution in the total number of registrations

2013 2012UK -166 -3.3% +15%

Switzerland -98 -1.8% +10%Taiwan -79 -9.1% +1%

Hong Kong -21 -1.7% -2%Chile -105 -8.2% +19%

Hotspot markets – Decline in registrations 6 months to 30 June 2013


• Growing product rationalization for cross-border marketing (e.g. at shareclass level to reduce distribution/compliance costs);

• MiFID II, RDR – forcing changes to distribution strategies;

• 3 Asian passport initiatives: HK – China mutual recognition; Asian fund passport (4 countries pilot project launching in 2016); ASEAN mutual recognition (professional investors distribution with

limited & common requirements);

• AIFMD - Alternative fund managers assessing use/benefit of theMarketing Passport.

Cross-border fund distribution trends and new regulations

AIFMD

The marketing passport

The Marketing passport

In scope of the AIFMD marketing provisions

• 4 conditions:

- Marketing of AIF (“a direct or indirect offering or placement);- At the initiative of the managing AIFM;- To professional investors domiciled or with a registered office in the EU;- In the EU.

• A notification process is required from Home to Host regulator to start marketing.

Passive marketing or “reverse solicitation” outside the scope of AIFM Directive

AIFMD Benefits

• Establishment of common requirements to achieve a passport to distribute on across border basis to professional investors; Consistent approach to market to professional investors in the EU.

• Set up of minimum conditions for marketing in the EU without passport (Article 42 ofthe AIFMD directive);

Each M.S. can have stricter rules and may forbid marketing withoutpassport to professional investors.

• To open the EU market to non EU AIFM/AIFs; What are the options to market in EU to professional investors?

Overview of the market access options

EU AIFM/EU AIF EU PASSPORT

EU AIFM/Non EU AIF

Non EU AIFM/ EU AIF

Non EU AIFM/Non EU AIF

Private Placement

EU Passport ?

Private Placement

Private Placement

?

?

?

EU Passport ?

EU Passport ?

2014 2015 20182013

Market access options: Passport or Private placement

Options for marketing to EU professional investors:• EU AIF managed by EU AIFM – ONLY with Passport;• Others – until 2015 - ONLY private placement. (article 42).

Options for non-EU AIFs and AIFMs marketed to EU professional investors:Dual system• Passport available (subject to ESMA’s positive opinion);• NPPR still allowed under minimum requirements (in article 42).

Access to EU professional investors ONLY with EU passport; Potential phasing out of the NPPR.

Coexistence of Passport and Private placement

2013

2015

2018

Market access options: Private placement

Before AIFMD: National rules govern the ability to market non harmonised funds to professional investors;

AIFMD: Articles 36, 42 and 43 set up minimum conditions for marketing in the EU without passport but M.S can have stricter rules and may forbid marketing without passport to professional (and may not allow marketing to retail investors).

With AIFMD implementation,

some M.S are reviewing/changing their PPRs


• Private placement regulated at national level in a number of different ways and often opaque;

• This creates:- Uncertainty on what can be offered and under what conditions;- Legal uncertainty on the transactions;- Costs to find out about the rules and to comply;- Missed opportunities.


Cooperation arrangements are in place between AIF’s country, AIFM’s MS and target MS;

The AIFM complies with the AIFMD’s transparency requirement (AR, reporting to investors/regulators);

The AIF is not established in a country listed as a NCCT by FATF; The targeted member states must allow private placement; The AIFM complies with the specific Host MS additional country requirements

for marketing to professional investors under PP.

Private Placement permitted to non-EU structures if:


• There are important benefits for the investment fund industry to allow transactions under private placement;

• But no regime at EU level and national regimes are more closing than opening to private placement;

• Closing private placement between professionals for UCITS funds could be detrimental as institutional investors have the majority in UCITS funds;

• Is the future an EU private placement regime or simply passport or nothing (ESMA decision)?


What will be the AIFMD impact in Luxembourg?

Luxembourg actual landscape

Luxembourg leading position

• Largest investment centre in EU (more than EUR 2,400 in AUM).

• 1st funds distribution centre (Luxembourg domicilied funds are offered in more than 70 countries).

• 2nd largest investment centre in the world.

• Dominant share in both retail and institutional marketplace in EU.

Luxembourg actual landscape

Luxembourg UCITS market share: Luxembourg AIFs market share:

Top 5 European countries holding the higher Net Assets.

ESMA statistics Q2

AIFMD impact for Luxembourg

Non-EU Alternative Asset Managers choose Luxembourg for their AIF’s

POSITIVE

Non-EU Alternative Asset Managers do not choose Luxembourg for their AIF’s

NEGATIVE

Will non-EU Alternative Asset Managers chooseLuxembourg?


Luxembourg

Efficient & reliable fund infrastructure;

Leading fund center;

Nearly 300 regulated financial service companies

with expertise in administration, custody and

distribution of funds;

42,000 financial services professionals employed;

190 management companies;

149 banks from 23 countries;

103 Transfer Agencies.

Longstanding experience;

Over the last 25 years, fund service providers have

accumulated knowledge of the AM industry including alternative investments;

Fund lawyers, audit firms, tax advisors highly

experienced;

Technology & expertise constantly evolving;

Active investment fund association (ALFI);

CSSF an accessible & industry focused regulator.


LuxembourgStrategic position;

Central location;

70% of EU wealth within 700Km of Luxembourg;

Attractive for highly educated professionals.

Stable politically, socially & economically;

fiscal stability (low government debt and low deficit levels);

Strong thriving economy.

World wide recognition;

Longstanding relationshipsbetween CSSF and authorities of UCITS

distribution.

Business oriented legal framework and competitive tax

regime;

Fund creation, merger & liquidation;

Multi-lingual regulator (English, French, German).


International professionals;

Concentration of international investment fund’s experts (Nearly 50% of residents are not Luxembourgish);

The word’s biggest fund managers use Luxembourg as their distribution hub.

Largest Fund distribution centre;

With experienced professionals in cross-border distribution matters.

Luxembourg


AIFMD presents an opportunity for Luxembourg to create a brand in the alternative fund market (as the one created for UCITS).

With Luxembourg’s expertise, experience and leading position in the investment fund’s industry, there are many good arguments in favor of Luxembourg as a chosen destination for non-EU Alternative Asset Managers.

Now the interview!!Deep dive into AIFMDWith AIF Managers…








FOCUS on

Distribution SupportThe Voice of the Distributor

Moderator: Raymond Groen in ‘t Woud, Vice President, BNY Mellon European TA – Business Support & Strategy

Panelists: Richard Lepère, Managing Director, FundChannelSven Gräbedünkel, BHF Bank, Fund Execution platform

Distribution Support ServicesThe 2012 Value Chain

Voting system sponsored by KPMG Luxembourg S.à r.l.Voting system sponsored by

2012 Live Survey… 1st Question

Voting system sponsored by KPMG Luxembourg S.à r.l.

2012 Live Survey… 2nd Question

Voting system sponsored by KPMG Luxembourg S.à r.l.

2012 Live Survey… 3rd Question

2012 Live Survey… 4th Question

2012 Live Survey… 5th Question

The Distributor’s Perception of TA’s

1. Current challenges for distributors MiFID2 open vs guided architecture

2. Where should TA’s improve on services from a distributor perspective Onboarding Client Servicing & Query Management Standardisation from a Distributor perspective

3. What TA’s are not expected to deliver to the distributors

Regulatory FOCUS

Xavier Balthazar, Partner, PwC

Marco Zwick, Head of Compliance and Risk, Continental Europeand Middle East, Schroder Investment Management, Luxembourg

Regulatory FOCUS

Times are changing ...

20152014

FATCA

UCITSV (VI)Solvency II

INSURANCE

EMIR /CCP

AIFMD

Single Supervisory Mechanism

DoddFrank

Bank structure

CRD IV

BANKING

IMD II

Packaged Retail

Investment Products

Credit rating

agencies

MiFID II

Live!

Partly live!

Q4 2016

Q3 2016

Q2 2016

European Long Term Investment

Funds

Money Market Funds

Q4 2014

Q4 2014

Q1 2014

Slow progress

Central Securities

Depositaries

Not known

2015

Q1 2016

Financial Benchmarks

Q1 2016

Bank recovery

and resolution

2015

Partly live!

Q1 2014

Q4 2014

Q4 2014

ASSET MANAGEMENT... fast

2016

Regulation on European Long Term Investment Funds

European Long Term Investment Funds (“ELTIFs”)

ELTIFs must be closed to

redemptions and invest at least

70% of capital in unlisted assets

ELTIFs have a passport

(through the AIFM) for retail distribution in

the EU!!

Very important new category of fund if the definition of

eligible assets remains that

broad

A “spin off” of AIFMD: ELTIFs are AIFs which are submitted

to specific constraints

Go live

Q4 2014

AM

CYTADIPRIN

FA

Impact rating

Regulation on European Long Term Investment Funds

AIFM UCITS ELTIF

Regulatory approach A manager regulation

A product and a manager regulation

A product and a manager regulation

Eligible assets Liquid assets No restriction Non liquid assets

Ability for investors to redeem

Opened to redemptions – Min 2x per month

No restriction Closed to redemptions

Passport for distribution Yes – to any type of investors incl. retail

Yes – to professional investors only

Yes – to any type of investors incl. retail

Regulation on Money Market Funds

Money Market Funds which are UCITS or AIFs

MMFs invest in short term assets

and aim at offering returns in line with MM rates or value

preservation.

Two types of MMFs: Short Term MMs

and Standard

MMFs

CNAVs only allowed if 3% NAV buffer for compensating any difference

between CNAV and real NAV

A “spin off” of AIFMD and

UCITSD: MMFs are UCITS /AIFs

which are submitted to

specific constraints

“MMFs” or use of similar terms

restricted to Regulation compliant

funds

Rules on assets’ eligibility, investment

limits, credit risk assessment, stress

testing, regulator reporting, valuation,

etc.

Go live

Q4 2014

AM

CYTADIPRIN

FA

Impact rating

AIFMD – Impacts for TAs

AIFMD Impacts for TAs

Depositary to ensure that S/R are performed in

line with regulations and

fund documentation

Cash belonging to AIFs must be recorded on AIFs accounts – pay attention to collection

accounts and accounts opened at

intermediaries: Is it cash of the fund or

not?

Depositary to reconcile each

cash flow movement and identify material

cash flows

AIFM (TA by delegation) to provide timely

S/R confirmation – content is

prescribed by art. 26 L2

Go live AIFMD

22 July 2013

Impact ratingAM

CYTADIPRIN

FA

Luxembourg recent regulatory changes...

CSSF Circular 13/559 ESMA guidelines on ETFs and other UCITS issues Q1 2013

Regulation 345/2013 Regulation on European venture capital funds Q2 2013

Regulation 346/2013 Regulation on European social entrepreneurship funds Q2 2013

Massive wave of regulatory changes is not stopping. The financial industry remains under strong pressure from regulators

Threat on money market funds : Is this the end of money market funds (no rating)? Or the end of CNAV money market funds?

But one good news: new legislation on retail distributed long term funds moves fast. If the text is voted as currently drafted (there is a risk that the draft regulation will be amended to narrow the scope of eligible assets…), this will create opportunities for asset managers and push traditional asset managers to expand their product offer in the non listed / non liquid space!

Conclusion – as last year!

Regulatory FOCUSAn AML UpdateBy: Marco ZWICK

Schroders

Law of 27 October 2010 (i) enhancing the anti-money laundering and counter terrorist financing legal framework; (ii) organising the controls of physical transport of cash entering, transiting through or leaving the Grand Duchy of Luxembourg; (iii) implementing United Nations Security Council resolutions as well as acts adopted by the European Union concerning prohibitions and restrictive measures in financial matters in respect of certain persons, entities and groups in the context of the combat against terrorist financing

CSSF Regulation N°12-02 of 14 December 2012 on the fight against money laundering and terrorist financing published in January 2013

ALFI/ABBL/ALCO/ALRiM “Practices and Recommendations aimed at reducing the risk of money laundering and terrorist financing in the Luxembourg Fund Industry” published on 11 July 2013

What’s new?

Responsibilities of the different actors in terms of anti-money laundering and counter-terrorist financing: Management Company, Registrar and Transfer Agent, Global Distributor and local Distributors, Depository

Practical guidance on implementing a Risk Based Approach withfocus on geographic risk

Correspondent Relationship due diligence: A Correspondent Relationship is defined as a regular relationship between the UCI or any party acting on its behalf and processing orders on behalf of the UCI, and an Intermediary which is supervised by a financial authority, transmitting orders from its Customers.

Direct Investor due diligence and associated KYC checklists

Third party introducer regime <-> Delegation•

Recommendations and Practices

Article 29 of CSSF Regulation N°12-02

The "relationships similar" to cross-border correspondent banking relationships as referred to in Article 3-2(3) of the Law include notably those established for securities transactions or fund transfers, whether on behalf of the cross-border professional as principal or of its customers.


Where the units or shares of an undertaking for collective investment or an investment company in risk capital are subscribed through an intermediaryacting on behalf of his customers, the undertaking for collective investment, its management company, the investment company in risk capital or, where applicable, the respective proxy of the professionals shall put in place enhanced customer due diligence measures for this intermediary which is applied mutatis mutandis pursuant to the terms of Article 3-2(3) of the Law, Article 3(3) of the Grand-ducal regulation and Article 28 of this regulation in order to ensure that all the obligations under the Law, the Grand-ducal regulation and this regulation or at least equivalent obligations are complied with.

Law and regulation

Article 3-2 (3) of the AML Law of 12 November 2004, as amended

In the event of cross-border correspondent banking and other similar relationships with respondent institutions (…), credit institutions and other institutions involved in such relationships must: (a) gather sufficient information about a respondent institution to understand fully the nature of the respondent's business and to determine from publicly available information the reputation of the institution and the quality of supervision; (b) assess the respondent institution's anti-money laundering and anti-terrorist financing controls; (c) obtain approval from senior management before establishing new correspondent banking relationships; (d) document the respective responsibilities of each institution; (e) with respect to payable-through accounts, be satisfied that the respondent credit institution has verified the identity of and performed ongoing due diligence on the customers having direct access to accounts of the correspondent and that it is able to provide relevant customer due diligence data to the correspondent institution, upon request.

Law and regulation

Article 3(3) of the Grand-ducal regulation of 1 February 2010

In relation to cross-border correspondent banking relationships referred to in Article 3-2(3) of the Law, credit institutions shall also: − determine from publicly available information the reputation of the respondent institution and the quality of its supervision, including whether the institution concerned has been subject to a money laundering or terrorist financing investigation or regulatory action; − assess the respondent institution's controls against money laundering and terrorist financing and ascertain that they are adequate and effective; − document the respective responsibilities in the fight against money laundering and terrorist financing of each institution.

The authorisation procedure which requires approval from the senior management includes the authorisation by the senior management and involves the anti-money laundering and terrorist financing compliance officer.

Law and regulation


(1) The obligations laid down in Article 3-2(3), (a) and (b) of the Law and in the first two indents of Article 3(3) of the Grand-ducal regulation include the obligation to gather information on: - the country of establishment of the respondent institution as well as the

applicable legal and regulatory provisions relating to AML/CFT;- the applicable supervisory authority and regime; - the property and control structure of the respondent institution.

(2) The analysis of the obtained information and the resulting decision shall be documented in writing and be available to the competent authorities. Moreover, the professional shall carry out: - a periodic review according to the risk, and, where applicable, an update of

the information on which the decision to enter into a relationship was based; - a re-examination of this relationship, where information is obtained which is

likely to weaken the trust in the AML/CFT mechanism of the respondent's country of establishment or in the efficiency of the AML/CFT controls set by the latter;

- verifications and periodic assessments according to the risk so that the respondent institution ensures at all times the compliance with the subscribed commitments, notably with respect to the communication, without delay and upon request, of relevant identification data of customers with direct access to payable through accounts opened for them.

Law and regulation

Due diligence at two levels

Due diligence on the Intermediary (Respondent):- Normal due diligence in accordance with article 3 (2) of the Law; or- Subject to a lower risk, adaptation of the extent of normal due diligence

measures on a risk-sensitive basis; or- Subject to a higher risk, enhanced due diligence in accordance with article

3-2 of the Law in addition to the normal due diligence measures defined in article 3 (2) of the Law.

Enhanced due diligence on the Correspondent Relationship in addition to due diligence on the Intermediary (Respondent):- Gather sufficient information about the Intermediary to understand fully the

nature of the Intermediary's business and to determine from publicly available information the reputation of the Intermediary and the quality of supervision; and

- Evaluate the Intermediary's anti-money laundering and anti-terrorist financing controls; and

- Obtain approval from Senior Management of the UCI/Professional before establishing a new Correspondent Relationship; and

- Clearly understand the respective responsibilities of the UCI/Professional and of the Intermediary.



EEA/EU/Equivalent Intermediary

(COUNTRY LIST 1)

RIN Intermediary

(COUNTRY LIST 2)

Intermediary in jurisdiction with strategic AML/CTF deficiencies

(COUNTRY LISTS 3 AND 4)

Adaptation of the extent of normal due diligence measures on a risk-sensitive basis on the Intermediary.

AND

Enhanced due diligence measures on the Correspondent Relationship.

Normal due diligence measures on the Intermediary.

AND

Enhanced due diligence measures on the Correspondent Relationship with written documentation of the AML/CTF responsibilities of the Intermediary.

. Enhanced due diligence on the Intermediary (including certification of relevant identification documents of the Intermediary).

AND

Enhanced due diligence measures on the Correspondent Relationship with detailed written documentation of the AML/CTF responsibilities of the Intermediary.

AND

Intermediary’s written commitment to provide relevant Customer due diligence data to the UCI/Professional upon request.


Intermediary in jurisdiction subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing risks emanating from the jurisdictions

(COUNTRY LIST 5)

As part of the counter-measures to protect the financial system from the on-going and substantial money laundering and terrorist financing risks, no Correspondent Account will be opened. The UCI/Professional is responsible for the due diligence on the underlying Investor of the Intermediary, as defined in the Regulation.

Preparation for 4th FATF Mutual Evaluation Round: review of FATF assessment methodology with focus on efficiency

Preparation of 4th EU AML Directive

Definition of “tax crimes (related to direct taxes and indirect taxes)” as new predicate money laundering offence – no update

Legislation on banning the financing of cluster munitions in a number of EU countries

Prohibition of proliferation financing

Outlook





















16:45 - 18:30Closing cocktail

Supporting and Deliveringthe message in a bottle…

Listening to investorsListening to investors

BREAKOUT SESSION 1

Hot off the TA Regulatory Press!

Hot off the TA Regulatory Press!


Panelists: Sue Lee, Head of Process and Quality Governance, Global Distribution Support and Transfer Agency Services, HSBC Securities Services Pierre Mottion, Global Head of Transfer Agent and Fund Dealing Products, BNP Paribas Securities Services, Luxembourg

AIFMD – What about TA and Distribution ?

As part of the distribution chain and ownership chain, TA and Distribution are impacted by AIFMD for the restitution of assets and investor protection.

Various regulation items in EU regulation No 231/2013 of 19 December 2012 and in national laws

Topic Legal Reference

Impact on TA and Distribution

Holding fund assets in custody Articles 88 / 89

To hold funds assets in Custody, depositaries will perform due diligence on third-party fund administrators (i.e. Transfer Agents)

Reporting on subscriptionsand redemptions orders Article 26

Very similar to UCITS IV (management company identification, time and receipt of order, payment method, breakdown of fees)

PLUS

In case of distribution thourgh 3rd party, obligations to ensurethe 3rd party complies with reporting obligations to the investor

Recording of subscriptionsand redemptions orders Article 65 Very similar to UCITS IV (management company identification,

time and receipt of order, payment method, breakdown of fees)

Registration in distributingcountries National laws Similar to UCITS with appointment of local representatives (e.g.

fund representative agents, paying agents, etc)

AIFMD panel questions

1. Have you or your clients scheduled the changes and planned the submission?

2. Are your TA / Media Fulfillment solutions ready? (note: what needs to be amended)

3. Have you amended your trustee controls (and how)?

4. How do you handle the due diligence requirements?

5. Are you / your clients applying for the “Lite” solution?

AIFMD – Due Diligence on Transfer Agents

Depositaries should do an initial due diligence on TAs they are working with (or intend to work with) following the risk based approach

Proposed classification of TAs

Classification of TAs

Impact for the depositary

White-list The depositary may accept to register target fund holdings either in their own name or in the name of the AIFM/AIF without further delay

Grey-list The depositary may accept to register target fund holdings but only in the name of the AIFM/AIF

Waiting-list The depositary must perform additional due diligence (or is in the process of performing due diligence)

Black-list

The depositary does not accept to register target fund holdings – here the depositary will alert concerned AIFMs and the board of the AIF (because they invest or intend to invest into the target funds registered with such TAs) and potentially consider refusing to facilitate the investment in the target fund

FATCA - TimelineRegulation IRS Registration Due Diligence Withholding Reporting

2013

2014

2015

2016

2017

17 Jan:Final US FATCA regulation

………:Lux IGA

………:Lux regulation

19 Aug:IRS Portal opens

By 25 Apr:For 1st FFI list

2 Jun:Publish 1st FFI listBy Nov:Lux FI obtain GIIN

From Jul:New a/c opening procedure

By 30 Jun:Pre-ex. HV a/c reviewed

By 30 Jun:All pre-ex. HV a/c reviewed

From Jan:Gross proceeds for non-compl. a/c, earliest PPP appl.

By 31 Mar:1st “light” for 2014

By 31 Mar:2nd incl. NPFFI payments

By 31 Mar:Annual for US a/c last year to IRS on NPFFI payments

FATCA – common questions

Funds / Mancos / TAs – who is responsible for what?

IGA – Intergovernmental agreement - Benefit?

Who is concerned: Are Investment funds with no US Investors not investing in US securities

impacted? Is there a difference between funds in IGA country and funds in non-IGA

country? Which FATCA Status should Funds choose? Who needs to register with the IRS?

What is meant by IGA interaction?

Why could different IGAs apply, what does that practically mean?

Sample Distribution scenarios

Fund (Lux)

Nominee (UK):Product PackageBankFinal Investor:::

Distributor (D) (D) B

Local TA (HK)CSDFinal InvestorPlatform:::

IdentificationReportingWithholding

IdentificationReporting

Withholding


Withholding

NomineeIdentification

ReportingWithholding


Withholding

Retail InvestorInst. InvestorNominee

Local TA

Lux IGA

Lux IGA

Lux IGA

UK IGA

D IGA or Lux IGA?

HK IGA or Lux IGA?

FATCA – Distribution and TA Impacts

Cross Border Distribution versus Fund Domicile ?

Luxembourg structures sold in Asia/America

Cayman structures administered in Luxembourg

Impact of IGA - Model 1 verses Model 2

Sub register, service desk and nominee back office service models

FATCA – Are you ready ?

Are your platform changes completed /in-progress?

Will you offer FATCA classification if you do not provide KYC?

When is the time to start remediation?

Will the funds you administer be registered with the IRS by April 2014?

Do you service funds under trust agreements?

FATCA The IGA Landscape America

America Country is considering/in negotation with US

Country and US has formally indicated intention to sign

Country has signed

Expected signing date

Bahamas Yes - 1 Q4 2013

Bermuda Yes - 2 Initialled – 2 Q4 2013

British Virgin Islands Yes - 1 Yes - 1

Brazil Yes - 1

Canada Yes - 1 Q4 2013

Cayman Islands Yes - 1 Initialled - 1 Q4 2013

Chile Yes

FATCA The IGA Landscape in Asia

Asia Country is considering/in negotation with US

Country and US has formally indicated intention to sign Country has signed Expected signing

date

Australia Yes - 1 late 2013

China Negotiations in progress.

Hong Kong Yes - 2 Q4 2013

India Yes - 1 Q4 2013

Indonesia Yes

Japan Yes - 2 Signed

Korea, Republic of Yes Q4 2013

Macau

Malaysia Yes Q4 2013

Mauritius Yes

Philippines

Singapore Yes - 1 Q4 2013

Taiwan Yes - 2 Q4 2013

Thailand Yes -1

Vietnam





















16:45 - 18:30 Closing cocktail

Listening to investorsListening to investors

BREAKOUT SESSION 2

Distribution Operations &

Infrastructure Developments

Distribution Operations & Infrastructure Developments

Moderator: Valerie Letellier, Market Manager, Funds, SWIFT

Panelists: Sophie Thibeau, Director, Product Management-Funds, Euroclear

James Bolton, Executive Director, EMEA Transfer Agency & Distribution Support, JP MorganRaphael Machet, Global Product Manager Fund Dealing Services, BNP Paribas Securities Services LuxembourgOlivier Portenseigne, CCO, FundSquare

Distribution Operations & Infrastructure developmentsAgenda

Standardisation – where do we stand today?

Infrastructure developments: migration update and ISO20022 benefits brought forward


Distribution Operations & Infrastructure developmentsStandardisation – where do we stand today?

Funds Processing Standardisation Report – mid-2013 highlights

H1 2013: 14.3 million orders (+15% compared to H2 2012)

H1 2013: 3.2 million incoming faxes (+11% compared to H2 2012)

Q2 2013: total automation rate (ISO and proprietary files) = 77.8% (against 77.7% in Q4 2012)

ISO Automation: 46.4% (+2.6% compared to Q4 2012) Proprietary FTP: 31.4% (-2.5% compared to Q4 2012) Manual processing: 22.2% (-0.9% compared to Q4 2012)

Q2 2013 Luxembourg Ireland

ISO Automation 57% 24%Proprietary FTP 18% 60%

Total automation 75% 84%

Manual processing 25% 16%

Market CoverageLU and IE cross-border funds

>80% TA market coverage

Contributors32 Transfer Agents

Luxembourg & IrelandTotal order volume evolution (2009-Q2 2013)

Mid 2013 results

EFAMASurvey

20102009 2011 2012

(in millions) end 2011

mid 2012

end2012

mid 2013

Growth mid 12-end 11

Growth end 12-mid 12

Growth mid 13-end 12

Total number of orders 11.9 11.9 12.5 14.3 0% +4% +15%

2013

Luxembourg & Ireland Total standardization rate evolution – per country

Mid 2013 results

EFAMASurvey

Luxembourg Ireland

Progress on regional rates

Luxembourg Ireland

Mid 2013 results

0%10%20%30%40%50%60%70%80%90%

EMEA APAC Americas

ISO automation Proprietary Manual

Distribution Operations & Infrastructure developmentsMigration update

107

MT traffic for which both counterparties are live on MX

MT traffic for which either one or both counterparties are not yet MX‐ready

MX Live traffic

* September 2013

Incentives:• MX traffic fees decrease (since July 2011)• Test/pilot traffic 70% discount in 2013, then

gradually increasing back to standard level in 2015 (i.e. 50% of Live)

Disincentives:• MT traffic fees: surcharge introduced in Jan

2013 will increase in Jan 2014

• Monthly fee: surcharge introduced in Jan 2013 will increase in Jan 2014

• Both disincentives are subject to an « exemption rate » Will increase to 60% alignedto the expected progression of the global MX adoption rate

Migration tools & comms campaigns• Result in an increasing use of SWIFT’s

professional services around MX implementation projects

• Sustained focus on migration and renewedfocus on MT only pairs from the dedicatedFunds Migration Programme team

Distribution Operations & Infrastructure developmentsISO20022 benefits brought forward

1000+ Fund Players, 90+ Countries, 60+ million msg YTD

Mutual Funds Money Market Funds

Hedge Funds Alternative Funds

ISO 20022

AccountOpening

Settlment

Reconcilitation

Price report

Transfers

Switches

Cash Forecast

CorporateActions

Payments

Orders OrdersOrders

All Fund players

Distribution Operations & Infrastructure developmentsReinforcing business case: Funds is not the only one…

PANEL

« What’s next?

Or how the current industry changes would affect the landscape in 5 years from now… »

PANEL2. Where do you see the next priority for automation (after orders)?

1. AML/KYC

2. Trailer fees

3. Transfers

4. Settlement/reconciliation

5. Corporate Actions

6. Hedge funds

7. Other








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Documents

leading edge conference series 13 July 2010 - · PDF fileshare with you an ALFI TASC driven Distributor Satisfaction Survey with a live debate with ... FATCA, AIFMD, AML/KYC conflict