SCANNING 6

Miscellaneous - EU adopts transparency rules for investment products (PRIIPs) Background Retail investors often face confusing and com- plex information about packaged retail and insur- ance-based investment products (“PRIIPs”). This creates a situation in which retail investors are not completely able to assess or compare correctly risks and cost of products. On 24 October 2014 the Regulation of the Euro- pean Parliament and of the Council on key infor- mation documents for packaged retail and insur- ance-based investment products (PRIIPs) aimed at improving market transparency for retail investors was published and is available here. What’s in there? On 10 November 2014 the Council published a press release explaining the objectives and the con- tent of this Regulation which is part of a package of measures that have been adopted in order to boost consumer trust in financial markets. This Regulation requires key information docu- ments for PRIIPs which have to be compliant with format and content requirements to maximise un- derstanding of the information and therefore aim at increasing the security for retail investors. Key information documents should indicate: The press release also provides an overview of products not falling into the scope of application, such as non-life insurance products or officially recognised pension schemes. Undertakings for collective investment in transfer- able securities (“UCITS”) will not be subject to the Regulation for five years.They are already subject to key information requirements under other EU rules (Directive 2009/65/EC). As part of the review of the Regulation, the Commission will assess whether the five-year transition for UCITS should be extended. « The nature and features of the product; « Whether it is possible to lose capital; « The costs and risk profile of the product; « Relevant performance information.

What’s in there? On 10 November 2014, the Presidency of the Coun- cil of the European Union published a compromise text on the proposal relating to the Regulation on Money Market Funds. In addition, the proposal of the EU Parliament published on 26 November 2014. A number of amendments have been put forward by both the EU Council and Parliament, some of which are in direct contrast with one another. The key amendments proposed in the texts are compared in the table below.

What’s next? A final, agreed text remains outstanding and fur- ther amendments are to be expected. A draft re- port on the Regulation is expected from the ECON Committee in early December 2014, with a vote on the Committee-approved report expected in early spring 2015. The EU Parliament is due to vote on the Proposed Regulation again in March 2015.

THE COMPRISE TEXT OF THE EU COUNCIL IS AVAILABLE HERE.

THE DRAFT REPORT OF THE EU PARLIAMENT IS AVAILABLE HERE.

COMMISSION PROPOSAL

EU PARLIAMENT DRAFT REPORT

EU COUNCIL COMPROMISE

CNAV

CNAV MMF

Retail CNAV MMF

« Retail and small professional CNAV MMF

«

« EU public debt CNAV MMF

No buffer

«

NAV Buffer & Liquidity

3% buffer

« Buffer for EU public debt CNAV MMF (unclear)

Liquidity fees and gates

«

Liquidity fees and gates

«

« Conditions to invest in securitization (10%)

« OTC derivatives not allowed

« Conditions to invest in securitization (10%) Repurchase agreements allowed under certain conditions Units or shares of MMF Possible subject to conditions « «

Eligible assets

Repurchase agreements not allowed

«

External support

Possible subject to conditions

Possible, but restricted and subject to EU approval

Liquidity Requirements

10% daily, 20% weekly

15% daily, 30% weekly 10% daily, 20% weekly

Amortised cost

Allowed

MMI of 60 days maturity maximum

Allowed

Reporting/ transparency

Reporting to NCA

Extensive transparency for investors

Reporting to NCA

Rating

Internal rating system Internal rating system to be approved by NCA and ESMA

Internal rating system

Supervision

ESMA dedicated unit

FOR MORE DETAIL THE COUNCIL PRESS RELEASE IS AVAILABLE HERE.

Timing

6 months

3 months

12 months

DIRECTIVE 2009/65/EC IS AVAILABLE HERE.

page 4 - Scanning - December 2014