Fund management passport must go through
European fund managers have fought a long and hard battle to get a deal on a passport that will finally allow them to run funds in European Union countries without having to set up management companies in each member state.
Ucits IV, the legislation that will bring in the change, was voted through the European Parliament in January and is expected to apply from 2011, paving the way for the proper exercise of the fundamental freedom of services when it comes to the cross-border management of investment funds.
Ucits III, its predecessor, has been a huge success, having given fund managers a bigger tool box to work with. This has enabled hedge fund managers to reach a wider investor base and traditional managers to offer hedge fund-style strategies in the regulated arena.
According to a Financial Times report (Uncertain Future For Fund Passport, March 22), however, there appears to be a question mark over just how far the (national) authorities are now willing to let the management passport go.
In a recent report (published by the Financial Services Authority on March 18), Lord Turner, chairman of the said authority, identified cross-border activities of banks as a possible issue. EU rules already allow banks recognised by their home country supervisors as sound to operate in other member states. Lord Turner notes that this leaves depositors (or governments) in one country vulnerable to the failure of banks in another country if the home country falls down on supervision, or does not have the resources to rescue a bank or fund depositor protection. The failure of Icelandic banks operating in the UK is a case in point.
Banks are in a different league to fund managers, and Iceland is not bound by EU legal and regulatory standards, but if the bank passport has created problems, there may be lessons to take on board when it comes to the fund management passport, the FT report adds.
The regulatory world emerging from the credit crisis will indeed be "substantially different from the one that has prevailed to date", but if the freedom of services is truly considered to be a fundamental one, then the freedom to provide properly regulated cross-border fund management services must indeed come to pass.
Whether or not regulators take a second look at the risks involved in handing fund managers a (one must say long overdue) passport to manage funds across Europe, it is increasingly clear that hedge funds will be more closely regulated.
Hedge funds are already the subject of various papers and studies, including a consultation paper published by the International Organisation of Securities Commissions, the Turner Report itself and the report of the working group on regulatory issues for the G20 meeting in April.
The concerns centre on the systematic risks hedge funds pose, and while there is general acknowledgement they did not cause the crisis, there is a view that regulators need more information about their activities.
The likely outcome is, according to the FT, that hedge funds will be required to register with the authorities and provide data on size, investment style, leverage and performance. The impact of such oversight on their investment approach and returns is unknown, but better regulatory supervision should make hedge funds more attractive to institutional investors.
Not all countries currently regulate hedge funds, and when they do, regulation comes in different shapes and sizes. Whatever it is, the task ahead is clearly a big and important one.
Malta Country Report - The fourth Quantitative Impact Study
In order to harmonise and strengthen the European supervisory framework, the European Commission has issued a directive proposal for a modern risk-based supervisory framework for the supervision of European (re)insurance companies called Solvency II.
The Solvency II Framework Directive proposal was published by the Commission on July 10, 2007. Following the publication of the proposal, a work plan has been agreed between the Commission and the Committee of European Insurance and Occupational Pensions Supervisors covering the development and adoption of Level 2 implementing measures and future work to be done on Solvency II. The framework will, following current plans, be implemented in 2012.
As part of the Solvency II project, the Commission has requested that CEIOPS run a number of large scale field-testing exercises, called Quantitative Impact Studies, to assess the practicability, implications and possible impact of the different alternatives considered. The fourth Study on Solvency II was run by CEIOPS from April to July 2008.
Operational arrangements to conduct QIS 4 and collate results from insurance undertakings were made by national insurance supervisors separately in each member state, supplemented by a centrally-coordinated collation of groups' results. Results collated at national level were then shared within CEIOPS, which produced an overall CEIOPS QIS4 report which is available on CEIOPS' website: www.ceiops.eu/media/files/consultations/QIS/CEIOPS-SEC-82-08%20QIS4%20Report.pdf.
The Malta report summarises the finding of the Malta QIS4 study. This report aims to be factual, reporting the feedback received from Maltese insurance undertakings that participated in QIS4. The Malta response was considerably higher than that for the previous QIS3 study. The MFSA received 16 completed spreadsheets from insurance undertakings, comprising five insurance undertakings carrying out life business and 14 insurance undertakings carrying out non-life business.
These participants were all classified as small insurance undertakings, the criteria being that gross written premiums do not exceed €100 million in the case of non-life business and the gross technical provisions do not exceed €1,000 million in the case of life business (defined by CEIOPS).
The report is available on the MFSA website www.mfsa.com.mt under Publications & Events/Reports and Publications.
Further information including: Current Consultations; New Licences Issued during March; and International News can be accessed from timesofmalta.com.
MFSA web site: http://www.mfsa.com.mt
Registry web site: http://registry.mfsa.com.mt
Consumer web site: http://www.mfsa.com.mt/consumer
European fund managers have fought a long and hard battle to get a deal on a passport that will finally allow them to run funds in European Union countries without having to set up management companies in each member state.
Ucits IV, the legislation that will bring in the change, was voted through the European Parliament in January and is expected to apply from 2011, paving the way for the proper exercise of the fundamental freedom of services when it comes to the cross-border management of investment funds.
Ucits III, its predecessor, has been a huge success, having given fund managers a bigger tool box to work with. This has enabled hedge fund managers to reach a wider investor base and traditional managers to offer hedge fund-style strategies in the regulated arena.
According to a Financial Times report (Uncertain Future For Fund Passport, March 22), however, there appears to be a question mark over just how far the (national) authorities are now willing to let the management passport go.
In a recent report (published by the Financial Services Authority on March 18), Lord Turner, chairman of the said authority, identified cross-border activities of banks as a possible issue. EU rules already allow banks recognised by their home country supervisors as sound to operate in other member states. Lord Turner notes that this leaves depositors (or governments) in one country vulnerable to the failure of banks in another country if the home country falls down on supervision, or does not have the resources to rescue a bank or fund depositor protection. The failure of Icelandic banks operating in the UK is a case in point.
Banks are in a different league to fund managers, and Iceland is not bound by EU legal and regulatory standards, but if the bank passport has created problems, there may be lessons to take on board when it comes to the fund management passport, the FT report adds.
The regulatory world emerging from the credit crisis will indeed be "substantially different from the one that has prevailed to date", but if the freedom of services is truly considered to be a fundamental one, then the freedom to provide properly regulated cross-border fund management services must indeed come to pass.
Whether or not regulators take a second look at the risks involved in handing fund managers a (one must say long overdue) passport to manage funds across Europe, it is increasingly clear that hedge funds will be more closely regulated.
Hedge funds are already the subject of various papers and studies, including a consultation paper published by the International Organisation of Securities Commissions, the Turner Report itself and the report of the working group on regulatory issues for the G20 meeting in April.
The concerns centre on the systematic risks hedge funds pose, and while there is general acknowledgement they did not cause the crisis, there is a view that regulators need more information about their activities.
The likely outcome is, according to the FT, that hedge funds will be required to register with the authorities and provide data on size, investment style, leverage and performance. The impact of such oversight on their investment approach and returns is unknown, but better regulatory supervision should make hedge funds more attractive to institutional investors.
Not all countries currently regulate hedge funds, and when they do, regulation comes in different shapes and sizes. Whatever it is, the task ahead is clearly a big and important one.
Malta Country Report - The fourth Quantitative Impact Study
In order to harmonise and strengthen the European supervisory framework, the European Commission has issued a directive proposal for a modern risk-based supervisory framework for the supervision of European (re)insurance companies called Solvency II.
The Solvency II Framework Directive proposal was published by the Commission on July 10, 2007. Following the publication of the proposal, a work plan has been agreed between the Commission and the Committee of European Insurance and Occupational Pensions Supervisors covering the development and adoption of Level 2 implementing measures and future work to be done on Solvency II. The framework will, following current plans, be implemented in 2012.
As part of the Solvency II project, the Commission has requested that CEIOPS run a number of large scale field-testing exercises, called Quantitative Impact Studies, to assess the practicability, implications and possible impact of the different alternatives considered. The fourth Study on Solvency II was run by CEIOPS from April to July 2008.
Operational arrangements to conduct QIS 4 and collate results from insurance undertakings were made by national insurance supervisors separately in each member state, supplemented by a centrally-coordinated collation of groups' results. Results collated at national level were then shared within CEIOPS, which produced an overall CEIOPS QIS4 report which is available on CEIOPS' website: www.ceiops.eu/media/files/consultations/QIS/CEIOPS-SEC-82-08%20QIS4%20Report.pdf.
The Malta report summarises the finding of the Malta QIS4 study. This report aims to be factual, reporting the feedback received from Maltese insurance undertakings that participated in QIS4. The Malta response was considerably higher than that for the previous QIS3 study. The MFSA received 16 completed spreadsheets from insurance undertakings, comprising five insurance undertakings carrying out life business and 14 insurance undertakings carrying out non-life business.
These participants were all classified as small insurance undertakings, the criteria being that gross written premiums do not exceed €100 million in the case of non-life business and the gross technical provisions do not exceed €1,000 million in the case of life business (defined by CEIOPS).
The report is available on the MFSA website www.mfsa.com.mt under Publications & Events/Reports and Publications.
Further information including: Current Consultations; New Licences Issued during March; and International News can be accessed from timesofmalta.com.
MFSA web site: http://www.mfsa.com.mt
Registry web site: http://registry.mfsa.com.mt
Consumer web site: http://www.mfsa.com.mt/consumer