Europe: ELTIF 2.0 Has Been Published
On 15 March 2023, amendments to the EU Regulation on the European Long-Term Investment Fund (ELTIF) were published in the Official Journal of the European Union. They will apply from 10 January 2024.
Read MoreEurope: Is ELTIF 2.0 a More Viable Structure for Long-Term Investment in the EU?
Version 1 of the European Long-Term Investment Fund (ELTIF) has not been a huge success story with only a few relatively small funds launched to date. However the development of a well-supported fund structure for retail investors to invest in illiquid long-term assets remains a key priority for EU legislators.
Read MoreEurope: FCA Sets Ambitious Goal to Improve Asset Management Regulation in the UK
By Robert Lloyd, Maya Ffrench-Adam and Philip Morgan
On 20 February 2023, the FCA published a discussion paper (DP23/2) on improving the UK asset management regime. Key themes include:
Alignment with Relevant International Standards
The FCA does not want to create unnecessary complexity for firms operating in multiple jurisdictions. It aims to develop the regime to interact effectively with international requirements, while promoting the international competitiveness of the UK economy.
Read MoreEurope: UK Regulator Issues New Recommendations to Firms on Consumer Duty Implementation
By Andrew Massey and Robert Lloyd
With effect from 31 July 2023*, a new Consumer Duty will require firms conducting regulated activities in the UK to act to deliver good outcomes for retail customers. The FCA has conducted a review of the implementation plans of a number of larger firms, and published its findings on 25 January 2023.
Although pertaining to larger firms, the findings – particularly the examples of good practice and areas for improvement – are intended to be “useful” for all firms preparing for the Duty. The underlying concern identified by the FCA is the risk that firms may not be ready in time, or may struggle to embed the Duty effectively throughout their business.
Read MoreUnited Arab Emirates: SCA Overhauls Regulations Governing Foreign Fund Offerings
By: C. Todd Gibson, Amjad Hussain, and Zaid Abu-Shattal
The Securities and Commodities Authority (“SCA”), the federal financial regulatory agency in the United Arab Emirates (“UAE”) issued on 16 January 2023 a suite of new decisions and regulations, which introduced sweeping changes to the public distribution of foreign funds in the UAE.
Pursuant to SCA Chairman of the Board of Directors Decision No. 4/RM of 2023 Concerning the Procedures of Adjustment of Situation to Promote Units of Foreign Funds in the UAE (“Foreign Funds Regulations”), which came into effect on 17 January 2023, promotion of foreign funds in the UAE is now limited to private distribution to professional investors and/or market counterparties, as defined in the SCA Rulebook. As of today, the updated regulations are only available in Arabic.
Amongst other obligations set out in the Foreign Funds Regulations, promoters of foreign funds in the UAE must amend their arrangements with managers of foreign funds to comply with the provisions of the Foreign Funds Regulations.
The Foreign Funds Regulations state that promoters may continue performing their obligations pursuant to contracts that are still in force for a period not exceeding six months from 1 January 2023 or until the expiration of such contracts (whichever comes first), provided that the registration of the concerned foreign funds are renewed within the transitional period and payment of the prescribed fees are made to the SCA.
The SCA seems to want to encourage global asset managers to set up an onshore presence and establish onshore domestic public or private funds to target investors in the UAE in accordance with the new requirements and processes that were also issued on 16 January 2023 under the SCA Chairman of the Board of Directors Decision No. 1/RM of 2023 on the Regulation of Investment Funds. The SCA also issued decisions with respect to regulations governing the registration of securities for listing purposes, amending certain provisions of the SCA Rulebook, clearing activities in local commodity markets, and SCA services fees.
United States: PCAOB’s Vacating 2021 Determination under HFCAA Lowers the Risk of Delisting
By: Yuki Sako and Michael G. Lee
On 15 December 2022, the Public Company Accounting Oversight Board (PCAOB) announced that it was able to secure complete access to inspect and investigate audit firms in China. From September to November 2022, PCAOB staff members “conducted on-site inspections and investigations in Hong Kong…thoroughly testing all aspects of the agreement necessary to assess whether [Chinese] Authorities would allow complete access.” The PCAOB’s inspections and investigations were pursuant to a written agreement, called the Statement of Protocol, which the PCAOB entered into with Chinese authorities on August 26, 2022. The PCAOB concluded that Chinese authorities “did not obstruct the PCAOB’s ability to inspect and investigate completely, consistent with U.S. law.” Consequently, the PCAOB decided to vacate its previous December 16, 2021 determination, made pursuant to the Holding Foreign Companies Accountable Act (HFCAA), that positions taken by China prevented the PCAOB from inspecting and investigating firms headquartered in mainland China and Hong Kong completely.
Read MoreAustralia: ASIC Releases Update on Recent Enforcement Action in Australia and Guidance for Target Market Determinations
By Jim Bulling and Anabelle Weinberg
1. ASIC enforcement and regulatory update reveals areas of focus
ASIC has published their enforcement and regulatory update outlining the key actions taken between 1 July and 30 September 2022 (REP 753).
Read MoreUnited States: SEC Proposes Regulation Best Execution
By: Stacy L. Fuller and Nicholas O. Ersoy
On December 14, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed Regulation Best Execution (“Regulation Best Ex”) under the Securities Exchange Act of 1934, as amended. Regulation Best Ex would generally impose requirements on broker-dealers to use reasonable diligence to ascertain the best market for a security transaction and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions, subject to certain exemptions. For over half-of-a-century most broker-dealers have been subject to the Financial Industry Regulatory Authority’s best execution rule 5310, but if Regulation Best Ex is adopted, the SEC would begin to regulate best execution directly.
Read MoreAustralia: ASIC Gears Up Enforcement Activity
By Jim Bulling and Anabelle Weinberg
1. ASIC takes further action on greenwashing
ASIC has issued three infringement notices to investment manager Vanguard Investments Australia Ltd (Vanguard) in further action against alleged greenwashing.
ASIC was concerned that Product Disclosure Statements for the Vanguard International Shares Select Exclusions Index Funds may have misled the public by overstating an investment screen which claimed to prevent investment in companies involved in significant tobacco sales.
Read MoreAustralia: Australian Government abandons introduction of limited partnership structure
By Kane Barnett
The Australian Government has delivered the 2022-23 Federal Budget. One of the announcements relevant to the investment funds industry was that the Government “has reviewed and will not proceed with … the 2016–17 Budget measure that proposed introducing a new tax and regulatory framework for limited partnership collective investment vehicles”.
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