Apex Regulatory Update – April 2016

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New Proposed Anti-Money Laundering Rule for Investment Advisors

On August 25, 2015 – The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking relating to all investment advisers registered or required to be registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended (Advisers Act).

The proposed rule would require such advisers to:

  • Establish anti-money laundering (AML) compliance programs;
  • Report suspicious activity to FinCEN pursuant to the Bank Secrecy Act (BSA);
  • Comply with certain reporting and recordkeeping requirements under the BSA.
  • The authority to examine registered advisers will be delegated to the SEC by FINCEN.

An investment adviser’s AML program would need to be tailored to the specific risks posed by the advisory services it provides and the clients it advises. FinCEN specifically recognizes that private funds posing lower risks for money laundering would be risk-rated differently than higher risk funds.

CRS

The Common Reporting Standard (CRS) was developed by the Organisation for Economic Co-operation and Development (OECD) with G20 countries and in close cooperation with the EU. It went live on January 1st 2016.

CRS creates a mandatory obligation for the annual automatic exchange between governments of financial account information reported to them by local financial institutions (“FIs”) relating to account holders who are tax resident in other participating jurisdictions.

In order to achieve this CRS has introduced new requirements to identify and confirm the tax residence status of all new and existing Investors. This requirement operates alongside the current requirement to identify and confirm the status of investors under FATCA.

The CRS framework signifies a globally coordinated approach to the disclosure of income earned by individuals and organisations in order to combat tax evasion. To date, more than 95 jurisdictions have publicly committed to implementation.

Click Here for more on CRS Services.

Click Here for the differences between CRS and FATCA.

AIFMD Passport

The European Securities and Markets Authority (ESMA) has published the letter it received from the European Commission (EC) in respect of its advice on the application of the Alternative Investment Fund Managers Directive (AIFMD) passport to non-EU AIFMs and AIFs, and ESMA’s opinion on the functioning of the passport for EU AIFMs and on the national private placement regimes (NPPRs).

The EC has asked ESMA to complete its assessment of the regimes of the USA, Hong Kong, Singapore, Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia by 30 June 2016.

The EC agrees with ESMA’s suggestion that it produce another opinion on the functioning of the EU passport and NPPRs once the AIFMD has been fully transposed across the EU.

Once ESMA’s assessment is completed and if it recommends all the countries can be accepted, this must still be approved by the EU Commission, Parliament and Council. If that happens then the nations would be accepted and would be able to offer an AIFMD passport to managers of AIFS in their countries, granting access to a much wider investor base for their products.

Click Here for more on AIFMD Services.

Luxembourg Revolution in the Alternative Investment Fund Landscape

The Council of the EU announced that it adopted the draft Fourth Anti-Money Laundering Directive and the draft Wire

On Monday 14 December 2015, the Luxembourg government tabled a bill of law with the Parliament aiming at introducing a new type of Luxembourg investment fund: the reserved alternative investment fund (“RAIF” – or fonds d’investissement alternatif réservé, “FIAR”).

This new vehicle will widen the scope of options for structuring Private Equity, Real Estate or Hedge Funds and will reduce time to market significantly. The RAIF will be able to be set-up within a few days and will be largely modelled on the specialised investment fund (SIF) regime.

The RAIF will not be subject to the approval and/or supervision of the CSSF however, it will be managed by an authorized AIFM and as such will be indirectly subject to the AIFMD regime. The AIFM regulation will be fully applicable with the related investor protection and the RAIF will benefit from the marketing passport granted to the AIFM.

It is expected that the RAIF should be able to adopt any fund strategy as it seems no restrictions in terms of eligibility of assets would be envisaged and it can further adopt any legal form. Hence, by establishing the RAIF as a société en commandite par actions, (the “SCA”), it might “check the box” for the treatment as a partnership for US tax purposes.

It can be expected that this new type of AIF will be available over the course of Q2 in 2016.

If you have any questions please visit out locations page and contact your local office: Locations OR contact Kate Heffernan, Compliance Manager: [email protected]

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