Overview of legal framework Authorisation process Analysis of main fund managers’

obligations

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Overview of legal framework

Introduction UCITS and AIFs are funds. A fund raises

money from a number of investors to invest it as per a predetermined policy for the collective benefit of the investors.

UCITS are open funds whereas AIFs can be open or closed funds.

AIFM/ MC -managing one or more funds Permitted activities

• portfolio management and risk management• administration• marketing 2

The Framework’s benefits Modern framework equivalent to established

financial centers(full transposition of European Directives including ESMA Guidelines)

European passport Completeness

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The Framework

UCITS Law 78(I)/2012 Regulation 584/2010 implementing UCITS Directive AIFM Law 56(I)/2013 Regulation 231/2013 Regulation 447/2013 implementing AIFM directive

(opt-in procedure) Regulation 448/2013 implementing AIFM directive

(Member state of reference procedure) Regulation 345/2013 on EuVECA Regulation 346/2013 on Social entrepreneurship

funds New AIFs law (pending) CySEC’s directives, circulars and guidelines

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CySEC’s directives issued upon UCITS Law (78(I)/2012)

• 6 directives regarding Management Companies • 25 directives regarding UCITs• 1 directive regarding the transfer of registered seat• 1 Directive regarding custodians• 1 directive regarding Marketing of foreign AIFs.

AIFM Law (56(I)/2013 & Regulation 231/2013

• Only 5 directives regarding Fund Managers• Due to the Regulation• The Law regulates The Fund managers and

Custodians not the funds 5

New AIFs law (pending)

Replaces the current ICIS Law Final stages pending parliament

approval A number of directives to complete the

framework are WIP Comprehensive framework allowing

many different types of funds

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Authorisation process Highly recommended to have a meeting with CySEC’s

authorisation department before submitting the application

Submit complete application Initial review for completeness and request for missing

documents Thorough review of the application file and letter with

comments, suggestions and clarifications Submission of information as per above step Final review and preparation of report to the Board with

officer’s recommendation for approval/rejection or conditional approval.

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Authorisation conditions for MC/Fund manager

Capital requirements Fit and proper test of shareholders, directors and other

senior management Head office/registered address in the republic Organisational structure Ability to demonstrate adherence to the obligations of

the Law (IOM) CySEC requires detailed information about the funds

under management or to be managed to evaluate the adequacy of the above.

Authorisation does not mean automatically the entity can manage any UCITS/AIF.

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Authorisation Forms

AIFM

Form F56/2013/02 - Annex I of Directive DI56-2013-01

AIFM and UCITS MC

Form F56/2013/04 - Annex II of Directive DI56/2013/01 AIFM and UCITs MC

UCITS MC

Form F78-2012-01 - Annex 1 of Directive DI78-2012-01

UCITS fund

Form F78-2012-05 – Annex 1 Of Directive DI78-2012-07 9

Analysis of main fund managers’ obligations• Human and technical resources• Decision Making procedures• Administrative and accounting procedures,

control and safeguard arrangements for electronic data processing

• Internal control mechanisms (incl. permanent compliance function and internal audit function)

• Organisational structure and effective internal reporting

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Analysis of main fund managers’ obligations Adequate and orderly records Business continuity policy Valuation procedures Code of conduct – Act in the client’s best interest Best execution arrangements and policy Personal transactions rules Conflicts of interest Recording of portfolio transactions Recording of subscription and redemption orders Recordkeeping requirements Exercising voting rights

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Analysis of main fund managers’ obligations

Complaints handling procedures Delegation provisions Remuneration provisions Transparency provisions Risk management

identify, measure, manage and monitor appropriately all risks relevant to each AIF

market, liquidity and counterparty risks, and operational risks

Thank You12