Apex Regulatory Update – February 2015


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FATCA – Next Steps for 2015

FATCA officially went ‘live’ on 1 July last year, however many of the key implementation deadlines are staggered over several years. FATCA generally imposes registration, due diligence and reporting obligations on Foreign Financial Institutions (“FFIs”).

Last year FFIs were required to implement new account opening procedures and register with the US Internal Revenue Service (“IRS”). There was a surge in registrations on the IRS portal in late December as Model 1 FFIs rushed to register and obtain their Global Intermediary Identification Number (“GIIN”) before the year end deadline. For FFIs that have failed or were unwilling to register and comply, then 2015 will bring a number of challenges e.g 30% withholding tax on certain US source payments, stiff penalties and/or enforcement action by their local tax authority along with reputational, legal and other operational headaches.

For FFIs that have registered under FATCA then their focus for 2015 should be on the following upcoming deadlines:

  • March onwards: registering for an on-line account with the IRS or relevant local tax authorities in order to comply with the reporting obligations e.g registration required by the Cayman tax authority by 31 March 2015.
  • 31 March 2015*: reporting deadline to the IRS for Model 2 IGA jurisdictions and FFIs in non-IGA jurisdictions.
  • 31 May/30 June 2015: typical reporting deadlines for Model 1 IGA jurisdictions.
  • 30 June 2015: review of pre-existing individual high value accounts as at 30 June 2014 must be completed

*The IRS has advised an automatic 90-day extension is granted to all filers (without the need to file any form or take any action) with respect to calendar year 2014 only.

For the above reporting dates, FFIs must report the name, address, U.S. TIN (date of birth for pre-existing accounts if no U.S. TIN), account number, name and identifying number of the reporting institution, and account balance or value for US reportable accounts for calendar year 2014. Reporting obligations will increase in 2016 and 2017 respectively. It is essential that FFIs have a comprehensive FATCA compliance programme in place to limit non-compliance risk and meet the obligations of the relevant IGAs and/or the IRS.

IRS Launches International Data Exchange Service

In January 2015, the IRS announced the launch of a secure web application called International Data Exchange Service (“IDES”). IDES is an electronic delivery point where financial institutions and host country tax authorities can transmit and exchange FATCA data directly with the IRS. The sender encrypts the data and IDES encrypts the transmission pathway to protect the transfers. It runs in all major browsers, including Chrome, Internet Explorer, Safari, and Firefox. You can also do bulk data transfers via SFTP.Host country tax authorities and financial institutions in Model 2 IGA jurisdictions are encouraged to begin the enrollment process well in advance of their reporting deadline.

To read the IRS release on IDES  click here

FCA’s Annex IV Reporting System Crashes on Deadline Day

The FCA’s on-line reporting system “GABRIEL” experienced on-going systems issues on the days leading up to the first Annex IV reporting deadline this year. Some managers were able to gain intermittent access in order to file the report however others were left with no option but to wait for the system to be back up and running. The FCA has advised that they will not take any enforcement action against firms that were affected by this technical glitch.

The Annex IV reporting obligations apply to fully scope and sub-threshold EU managers as well as all non-EU managers that market funds in Europe under the National Private Placement Regimes. Sub-threshold managers are only required to partially complete the Annex IV reporting template whilst fully authorised managers are required to complete the full 400+ data points.

ESMA Decision on AIFMD Passport Extension due by 22 July 2015

ESMA is required to deliver an opinion and advice to the European Commission by 22 July 2015 on whether or not non-EU managers should be allowed to passport into EU member states. Industry participants had until early January this year to submit evidence on whether the passport should be extended or not.

The general feedback received is that it is too soon to make a meaningful assessment with regards to the operation of the AIFMD passport regime and that ESMA should consider postponing its opinion until a later date. It took 25 years before the concept of a marketing passport was introduced by the UCITS regime therefore rushing a decision without allowing enough time to assess practical experience is not recommended. The key concerns raised by the industry were in relation to the confusion regarding the definition of “marketing” and also the lack of a uniform approach taken by Member States in implementing the passport e.g differing processes, requirements, timelines and costs applied by each Member State.

Click here to view the industry responses received by ESMA.

Marketing and Distribution of Funds in Switzerland from 1 March 2015

The new marketing rules governing the distribution of foreign funds to Swiss investors comes fully into force on 1 March 2015. All marketing activities that fall within the scope of the definition “distribution” will be subject to regulatory requirements from this date. In particular, foreign funds distributed to unregulated qualified investors in and from Switzerland do not require registration with the Swiss Financial Market Supervisory Authority (FINMA) but have to appoint a Swiss representative, and a Swiss paying agent (namely, a Swiss bank) no later than 1 March 2015.

Apex Fund Services has agreements in place with a number of different Swiss representatives and paying agents. For more information please contact your local Apex Managing Director or alternatively contact Paul Spendiff, Head of European Sales at [email protected] or +44 (0) 20 3697 5371.

Apex Launches Depo-lite Solution with INDOS

Apex Fund Services (UK) Ltd has been granted approval from the FCA to provide AIFMD depositary-lite services. Under the regulations, EU managers of off-shore funds that wish to market into Europe under the private placement rules are required to appoint one or more entities to perform the three core functions of cash flow monitoring, safekeeping and verification of assets and oversight. Additionally, non-EU managers wishing to market their non-EU funds into countries that have ‘gold-plated’ their national private placement regimes may also need to appoint a depo-lite provider.

Apex has been authorised to provide asset verification and cash flow monitoring services and has partnered with INDOS Financial Ltd (FCA regulated) with regards to the ‘oversight’ function. This multi-provider model provides complete independent oversight of the fund administration duties and removes any conflicts of interest with the oversight function being performed in-house.

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