Fund Management Companies post AIFMD

Fund management companies post AIFMD

20 Sep 2012 Fund Management Companies post AIFMD

Switzerland

(with revised CISA)

Malta Luxembourg Liechtenstein
Regulatory Regime Regulated by the Swiss Financial Market Supervisory Authority (“FINMA”). Regulated by the Malta Financial Services Authority (“MFSA”). Regulated by the Commission de Surveillance du Secteur Financier (“CSSF”). Regulated by the Financial Market Authority (Liechtenstein) (“FMA”).
Approval Process Required prior launching of the Fund. License required prior to services being provided. Required    prior    to    services    being provided. License required prior to services being provided.
Organizational Structure of the Company Stock Company (société anonyme); Limited Liability Company (société à responsabilité limitée) Limited Liability Company. Stock Company (société anonyme); Limited Liability Company (société à responsabilité limitée) Limited Liability Company.
Minimum Capital – Capitalisation ratio CHF 200,000 and own equity at least equal to ¼ of the preceding years’ fixed overheads. In the case of newly established management companies, the calculated fixed costs of the management companies provided in the budget shall apply. EUR 125,000; and

 

The higher of the following:

 

i.     the sum of the non-trading book business risk components, the trading book business risk components, the commodities instruments –  risk component, the large exposures risk component, and the foreign exchange risk component; and

 

ii.  the Fixed Overheads Requirement.

EUR 125,000.

 

Management companies whose authorization is limited exclusively to collective portfolio management, must dispose of sufficient funds calculated on the basis of the assets under management and operating expenses of the preceding financial year.

 

Management companies which benefit from guarantees (of the same amount) provided by a credit institution or insurance undertaking, may be allowed to not provide up to 50% of the additional amount of own funds.

EUR 125,000 or the equivalent in Swiss francs. If the value of the fund portfolio managed by the management company exceeds EUR 250 million or the equivalent in Swiss francs, the management company must provide additional security. That additional security has to be equal to 0.02% of the amount by which the value of the portfolios of the management company exceeds EUR 250 million but shall not exceed EUR 10 million. In addition to the minimum initial capital requirements above, the initial capital must equal at least ¼ of the preceding years’ fixed overheads; in the case of newly established management companies, the calculated fixed costs of the management companies provided in the budget shall apply.

 

 

 

Key Persons – Substance Requirement At least 3 board members.

 

At least 2 to 3 “local” staff members ensuring the day to day operation.

At least 1 Malta resident director and 1 Malta resident manager providing the day- to-day operation.

 

Investment Committee shall consist of at least 3 persons (one of whom must be Malta resident).

At least 2-3 board members.

 

2 managers shall be appointed that are in charge of the oversight of the activity. They shall demonstrate  experience, time availability, be of good repute and be granted effective access to the resources required to assume their functions.

Prohibition of letter box managers. Minimum substance required.

At  least  2  “local”  staff  members ensuring the day to day operation

Fit and Proper Test Carried out prior to license.

Fit and proper test will be carried out on the directors, shareholders (qualifying i.e. holders of 10% or more of the shares) and the investment committee members.

 

ð        Normal due diligence.

Carried out prior to license.

Fit and proper test will be carried out on the directors, shareholders (qualifying i.e. holders of 10% or more of the shares) and the investment committee members.

 

ð        Full due diligence.

Carried out prior to approval.

Fit and proper test will be carried out on the  directors,  shareholders  (qualifying

i.e. holders of 10% or more of the shares), and members of the administrative, management and supervisory organs.

 

ð        Honor declaration.

Fit ad proper test applicable.
Independence Requirements FINMA requires that 1/3 of board members be independent from Shareholding, and Management.

 

The majority of board members do not carry on operational tasks.

The MFSA has no strict rules on independence between Shareholding, Board Members and Management. The CSSF has no strict rules on independence between Shareholding, Board Members and Management. The FMA has no strict rules on independence                                    between Shareholding, Board Members and Management.
Segregation of Function and Exemption Segregation of function between :

 

ð        Operation (asset management).

ð        Risk Monitoring.

ð        Compliance

 

“check and balances”

 

No exemption so far: Will FINMA grant an exemption for manager below CHF 100 million?

Segregation of function between :

 

ð        Operation (asset management).

ð        Risk Monitoring.

 

An exemption may be granted by the MFSA where the requirement of segregation is not appropriate and proportionate to the nature, scale and complexity of the company => (under EUR 100 million).

Segregation of function between :

 

ð        Operation (asset management).

ð        Risk Monitoring.

 

Chapter 16 Exemption for Small Managers (under EUR 100 million): not sure!

Segregation of function between :

 

ð        Operation (asset management).

ð        Risk Monitoring.

 

An exemption may be granted by the FMA where the requirement of segregation is not appropriate and proportionate to the nature, scale and complexity of the company => (under EUR 100 million).

Issuance of License – Timeline 18 to 30 weeks from the date of submission of the application documents. 15   to   18   weeks   from   the   date   of submission of the application documents. 15 to  24 weeks from  the date  of submission of  the application documents. Swift!

 

 

 

Running Costs – Total Expense Ratio (based on personal experience on a ration of 100 – 100 being the most expensive) 90/100 40/100 90/100 100/100
European Passport– Cross Boarder EU marketing passport not before 2015 at the earliest. Yes.

 

The AIFMD’s management passport will only be available to fully authorised AIFMs. It will therefore be a matter for national law as to whether an AIFM that is registered in one Member State would be able to manage an AIF that has been established in another Member State.

Yes.

 

The AIFMD’s management passport will only be available to fully authorised AIFMs. It will therefore be a matter for national law as to whether an AIFM that is registered in one Member State would be able to manage an AIF that has been established in another Member State.

As Liechtenstein  is a member of the EEA, the law complies with the European fund law. Fund management companies in Liechtenstein and their AIF funds will benefit from the European passport and access to the European market.
100 million exemption ? Yes – in CHF

Details not provided so far, but most likely registration process similar to AIFMD.

Yes – in EUR

According to the AIFMD, a smaller hedge fund manager which can rely on the Article 3(2)(a) exemption does not have to be authorised as an AIFM under the AIFMD. It only needs to be “registered” with its regulator, providing initial information to its regulator at the time of registration (e.g. identification of the AIFs that it manages and information on the investment strategies of those AIFs) and to regularly provide ongoing information to its regulator concerning “the  main instruments in which they are trading and on the principal exposures and most important concentrations of the AIFs that they manage” (see Article 3(3)(a) to (d)) AIFMD.

 

It is important to note, however, that the AIFMD’s exemption for smaller hedge fund managers is “without prejudice to any stricter rules adopted by Member States” (see the penultimate paragraph of Article 3(3).

 

The following is to be noted in relation to the information provided to competent authorities as part of the registration process:

Yes – in EUR

According to the AIFMD, a smaller hedge fund manager which can rely on the Article 3(2)(a) exemption does not have to be authorised as an AIFM under the AIFMD. It only needs to be “registered” with its regulator, providing initial information to its regulator at the time of registration (e.g. identification of the AIFs that it manages and information on the investment strategies of those AIFs) and to regularly provide ongoing information to its regulator concerning “the main instruments in which they are trading and on the principal exposures and most important concentrations of the AIFs that they manage” (see Article 3(3)(a) to (d)) AIFMD.

 

It is important to note, however, that the AIFMD’s exemption for smaller hedge fund managers is “without prejudice to any stricter rules adopted by Member States” (see the penultimate paragraph of Article 3(3).

 

The following is to be noted in relation to the information  provided to competent authorities  as  part  of  the  registration

Yes

Registration   process   similar   to AIFMD.

 

 

 

Article 3(3)(b) AIFMD – The total value of assets under management calculated should be included with the identity of the AIFs under management.

Article 3(3)(c) AIFMD – In order to provide updated information on the investment strategies of the AIFs, the AIFM may provide the offering document or a relevant extract  from the offering document or a general description of the investment strategy. The description of the investment strategy should at least include the following information:

(a)     the main categories of asset in which the AIF will invest;

(b)        any industrial, geographic or other market sectors or specific classes of asset which are the focus of the investment strategy; and

(c)   a description of the AIF’s borrowing or leverage policy.

Article 3(3)(d) AIFMD – Information collected in accordance with Article 3 AIFMD should be subject to the provisions of Article 50 of the AIFMD in relation to exchange of information between authorities.

The updated information referred to in Article 3 is to be provided on an annual basis.

process:

Article 3(3)(b) AIFMD – The total value of assets under management calculated should be included with the identity of the AIFs under management.

Article 3(3)(c) AIFMD – In order to provide updated information on the investment strategies of the AIFs, the AIFM may  provide the offering document or a relevant extract from the offering document or a general description of the investment strategy. The description of the investment strategy should at least include the following information:

(a)        the main categories of asset in which the AIF will invest;

(b)      any industrial, geographic or other market sectors or specific classes of asset which are the focus of the investment strategy; and

(c)    a description of the AIF’s borrowing or leverage policy.

Article 3(3)(d) AIFMD – Information collected in accordance with Article 3 AIFMD should be subject to the provisions of Article 50 of the AIFMD in relation to exchange of information between authorities.

The updated information referred to in Article 3 is to be provided on an annual basis.

 

Law of 2012 on SIF: an issue?

Taxation:

 

Income Tax

 

 

 

 

 

 

 

Withholding Tax

 

 

The federal corporate income tax rate is 8.5% flat. Cantonal tax rates can be levied at rates of up to 20%

 

Aggregated tax rate goes from approximately 12% to 28% depending on the Canton.

 

A withholding tax of 35% applies to dividends paid to a non-resident company unless the rate is reduced or dividends exempted by an applicable tax treaty.

 

 

Effective corporate tax of 5% as follows: Initial corporate tax rate of 35% subject to a 6/7 tax refund upon distribution of dividend.

 

 

 

 

No withholding tax on dividends, interest and royalties paid to non-residents.

 

 

Aggregate tax rate of 28.80% with its world-wide income.

 

 

 

 

 

 

A withholding tax of 15% applies to dividends paid to a non-resident company unless the rate is reduced or dividends exempted by an  applicable tax treaty.

 

 

12.5% flat rate corporate tax.

 

 

 

 

 

 

 

In principle, the withholding tax (so called coupon tax) on dividend distributions has been abolished under the new Tax Act. However, dividends paid out of reserves existing as per 1 January 2011 (so called old reserves) are subject to withholding tax at the rate of 4 %.

 

 

 

 

Number of Double Tax Treaties

 

Over 80 countries treaty.

 

Over 70 countries treaty.

 

Over 60 country treaty.

 

Approximately 5.

Fees and Expenses: Application Fee:  Between CHF 2,000 to 20,000.

 

Notary Fee : Approximately CHF 5,000.

 

Filing  Audit  Fee:  Approximately  CHF 20,000.

Registration Fee: EUR 970 (paid for incorporation of the asset management company).

 

Application Fee: EUR 1500 (paid upon application).

 

License Issue Fee: EUR 3000 (paid once upon approval & licensing from the MFSA).

 

Filing Audit Fee: Approximately EUR 2,500.

 

No Notary Fee

Application Fee:

EUR 2650 (payable upon application) in case of management of undertakings for collective investments.

 

EUR 3250 (payable upon application) in case where the management company provides services to undertakings for collective investments which services include wealth management.

 

Notary Fee: Approximately EUR 4,000.

Information to come with new draft law.
Licensed management companies Approximately 95 Approximately 80 Between 150 and 200 In May 2012, the FMA had granted licences to 22 management companies, of which 9 are currently allowed to manage UCITS as well

 

Our Experience

 

lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.

This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on moc.e1513256599taico1513256599ssaqc1513256599ocel@1513256599lrd1513256599 for any questions.