Management companies Taking up your business challenges together

Transcription

1 Management companies Taking up your business challenges together

2 Management companies are at a crossroads At a time when many asset managers are expressing concern about pressure on margins and complex regulatory developments, management companies must find new ways of adapting to a changing environment for both UCITS and non-ucits structures. Since the advent of UCITS III, substance requirements have gradually and steadily increased. Market players have adopted various models in response to this evolution, though a common challenge underpins their choices: the increased minimum efficient operational scale for running a UCITS fund, whether via a management company or on a self-managed basis. The introduction of AIFMD not only confirms this trend but extends its application to non-ucits products. The CSSF circular 12/546 dated 24 October 2012 sets out the conditions and organisational requirements applicable to UCITS management companies and self-managed SICAVs. Key substance requirements can be summarised as follows: Proportionality: derogations to substance requirements remain possible; however, the conditions under which they can be obtained have been reiterated by the CSSF Shareholders: a sponsorship letter can be requested by the CSSF, hence reintroducing Promotership on a selective basis, with ad hoc guarantee requirements Board composition: in addition to professional experience, directors must observe a more detailed and stringent incompatibility regime Conducting officers: the new circular provides detailed qualification requirements (experience, location, availability, occupation), including scope and duties. Conducting officers must observe a more detailed and stringent incompatibility regime Central administration and internal governance: both expertise and decision-making centres should be in Luxembourg and supported by adequate human and technical infrastructure Delegation: delegation and sub-delegation both require prior CSSF approval and due diligence by the management company

3 Our multi-disciplinary offering addresses key industry challenges Growing substance requirements are just one of several forces currently impacting the Luxembourg model of fund management and governance. Overall, we can classify these forces under 4 main categories: Emphasis substance requirements Increases the minimum efficient operational scale and potentially stimulates a demand for 3 rd party providers Complex regulatory evolution Constant adaptation of the business model to complex regulatory change. The most prominent examples being AIFMD, FACTA, EMIR, UCITS V and VI Luxembourg Management Companies Governance and risk management Enhanced governance system and management of the aggregated risk exposure when operating in multiple markets and asset classes Pressure on costs Challenge of doing more with the same resources, hence triggering a search for operational efficiency and scalability Our assessment of your challenges naturally led us to develop targeted services to assist in elaborating a sustainable business model Substance Business strategy Circular 12/546 substance health check Assess the regulatory and organisational adequacy of a ManCo or a self-managed SICAV against CSSF Circular 12/546 on substance Due diligence on delegated functions Director training on financial statements Identify all the material facts likely to influence the capacity of a third party to provide proper service, in line with regulatory requirements for initial and ongoing due diligence Organise collective trainings for directors on how to review financial statements Distribution Market entry intelligence Assistance in market entry, market potential analysis, distribution intelligence and peer benchmarking Fee benchmarking and optimisation X-border fund distribution Review and optimisation of fund fees based on distribution countries and distribution partners related intelligence Assistance in reviewing distribution capabilities, operational models, remuneration strategies and potential savings from new market initiatives (e.g. Platforms, T2S and CSD s) Technology IT systems and infrastructure Selection of IT packages across the servicing value chain and definition of an IT target operating model

4 Risk governance and management Risk UCITS package management SIF package EMIR package Short selling notifications Solvency & Basle reports Independent valuation ESMA Guidelines Performance fees review ISAE 3402 & SSAE 16 Risk Management Process review, gap analysis and development; risk reporting outsourcing (market risk/liquidity risk/leverage); SRRI outsourcing; risk model validation; back-testing reporting Assist in the development of a risk management function, including the production of ad hoc risk reports Perform a gap analysis on EMIR requirements: Clearing, Margin and Capital, and Reporting Identification of unauthorised strategies and execution of new regulatory notifications for authorised short selling transactions Assistance in the production of various look through transparency reporting Independent valuation of structured products under both UCITS and AIFMD Implementation of the criteria set out for collateralised transactions (e.g. securities lending, repo and OTC derivatives) Review of performance fees methodology and recurrent controls of the calculated performance fees before payment (Equalisation method included) Setup an Assurance Reports on Controls Internal audit Internal 12/546 Pressure on costs Business strategy Regulatory evolution Tax services FATCA for board members Advise board members via workshops, market intelligence, regulatory watch, decision trees, reviews of service provider offerings, gap analysis and implementation plans Regulatory strategy Market positioning and benchmarking Cooperative ManCo ManCo transformation and product rationalisation AIFMD ManCo upgrade AIFMD capital adequacy AIFMD restructuring advice AIFMD compliance readiness AIFMD remuneration review AIFMD business strategy review Assist in the authorisation procedure for all AIFMs with AUM above 100 million and AIFMs that choose to opt in Verify your required capital reserves, and review submissions to the relevant regulator Review your product range and assess the suitability of alternative routes to market (e.g. UCITS) Assess your existing compliance functions to validate their adequacy with best market practices and with the AIFMD Review current remuneration structures and assist in designing AIFMD-compliant remuneration policies Identify the optimum product and sale strategy, including a cost -benefit analysis of the decision to opt in Outsourcing NAV doctor/hotline Assist in the treatment of NAV errors and breaches in line with CSSF Circular 02/77 Compliance hotline Tax hotline Business strategy definition, including service model review, product management, sales strategy and market intelligence Tax and cost efficient company, owned by multiple asset managers to mutualise the costs of fund administration, distribution and governance Analysis of potential opportunities linked to the use of UCITS IV tools (ManCo passporting, masterfeeder and cross-border merger), including project management and execution support Tax services Direct tax - ManCo health check General health check, tax optimisation solutions and transfer pricing review Direct tax - Investment and product matrix Indirect tax - VAT impact analysis Outsourcing of the internal audit function External Statutory audit of financial statements, validation of group reporting, audit of consolidated financial statements Review of tax liabilities related to product structures and analysis of investors countries taxation regimes VAT declaration and treatment of new flows resulting from regulatory change (UCITS, AIFMD, MiFID II) Aberdeen tax reclaim Assistance in the handling of tax reclaim proceedings as a consequence of discriminatory withholding taxes Outsourcing Independent Valuation Outsourcing services for the independent valuation of complex instruments (e.g. OTC derivatives, target hedge funds, private equity and real estate assets) KIID factory Outsource KIID production, maintenance and dissemination Fund registration Outsource fund registration in target distribution countries Financial reporting Outsource financial reporting in target distribution countries Tax reporting Outsource tax reporting in target distribution countries Enhanced support service on a broad range of subjects including AML/KYC, UCITS IV, AIFMD and all aspects of investment fund regulation Assist in clarifying the tax implications resulting from key regulatory initiatives

5 From systematic promotership to selective sponsorship Circular 12/546 and CSSF press release 12/45 have the combined effect of removing the concept of Promoter for UCITS structures The past Any fund subject to the 2002 Law (UCITS III) needed to have a Promoter, i.e. an entity that would ultimately bear financial responsibility for the fund The CSSF has traditionally imposed demanding requirements on this entity, requiring it to: -- Have at least 7.5 million in equity capital -- Be a regulated entity -- Compose the majority of the board of the fund, so as to ensure full involvement in the fund it initiates Entities that were too small or that failed to comply with the promotership requirements could avail of a co-promotership service either via a Luxembourg bank or via a third-party Luxembourg management company The present In a communication following the new circular s publication, the CSSF specified that promotership is no longer required, provided that UCITS management companies and self-managed SICAVs submit a comprehensive report describing how they will comply with Circular 12/546 (deadline is 15 April 2013) Every new fund established between the publication of the circular and 30 June 2013 must either become a compliant self-managed SICAV or designate a compliant management company The situation for Part II funds remains unchanged unless they are managed by a compliant UCITS management company The removal of promotership requirements does not prejudice the potential need for a sponsorship letter (lettre de patronage)

6 Contacts Advisory and Consulting Vincent Gouverneur EMEA Investment Management leader Benjamin Collette Strategy and Corporate Finance Sergio Venti Senior Manager Corporate Strategy Lou Kiesch Regulatory Strategy Mike Flynn Directeur Regulatory Strategy Xavier Zaegel Capital Markets/Financial Risk xzaegel@deloitte.lu Laurent Berliner Business Risk lberliner@deloitte.lu Jérôme Sosnowski Directeur Business Risk jsosnowski@deloitte.lu Tax Accountancy Sophie Mitchell leader somitchell@deloitte.lu Stéphane Césari scesari@deloitte.lu Johnny Yip Lan Yan jyiplanyan@deloitte.lu Raymond Krawczykowski Tax leader rkrawczykowski@deloitte.lu Christophe Diricks Tax cdiricks@deloitte.lu Jean-Philippe Foury Accountancy leader jpfoury@deloitte.lu Karine Thil Consolidation and IFRS Specialist kthil@deloitte.lu Deloitte is a multidisciplinary service organisation which is subject to certain regulatory and professional restrictions on the types of services we can provide to our clients, particularly where an audit relationship exists, as independence issues and other conflicts of interest may arise. Any services we commit to deliver to you will comply fully with applicable restrictions. Due to the constant changes and amendments to Luxembourg legislation, Deloitte cannot assume any liability for the content of this leaflet. It shall only serve as general information and shall not replace the need to consult your Deloitte adviser. About Deloitte Touche Tohmatsu Limited: Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence Deloitte General Services Designed and produced by MarCom at Deloitte Luxembourg