Scanning Special June 2014

What’s next? The Regulation will have to be formally approved by the Council at first reading and then published in the Official Journal of the EU. Manufacturers shall have KIDs ready by 2 years following entry into force of the Regulation. UCITS Manufacturers will be exempted until at least 5 years after entry into force of the Regulation. YOU CAN FIND THE LINK TO THE EP PRESS RELEASE HERE. THE TEXT OF THE REGULATION IS AVAILABLE HERE. SD Directive amendment adopted by the European Council Background The Council Directive 2003/48/EC (Savings Di- rective - SD) applies since 1 July 2005. It aims at tackling cross-border tax evasion by creating an information exchange system for tax authorities to help identify individuals that receive savings income in a Member State other than their own. The core of the SD is the automatic exchange of information. This means that Member States col- lect data on the income from savings of non-res- ident individuals, and automatically provide this data to the authorities where the individual re- sides. Currently, 26 Member States apply the automatic exchange of information. Luxembourg is allowed, for a transitional period, to apply a withholding tax instead of engaging in the auto- matic exchange of information. What’s in there? EU Council adopted on 24 March 2014 an amendment to the SD. The below list evidences the main features of the future SD regime: « The concept of income would be enlarged as to include not only interest but other substantially equivalent income; « It would cover income received from non-UCITS funds independently of their legal form and of their country of incorporation. « Circumvention of the SD rules would be pre- vented by requiring paying agents to apply a "look-through approach" in case of payments to entities established in countries where the SD or equivalent measures do not apply.

What’s next? The amendment should be adopted at a forth- coming plenary session of the EP in 2014. Once entered into force, Member States will have until 1 January 2016 to transpose the amendments to the SD into national law. Luxembourg has announced on 21 March 2014, that from 2015 onwards it will participate in the automatic exchange of information, and opt out of the withholding tax framework. ESMA Final Report on the Revision of the Provisions on Diversification of Collateral Background In December 2012, ESMA published guidelines on ETFs and other UCITS issues (ESMA/2012/832), which entered into force on 18 February 2013 (the "Guidelines"). ESMA launched a consultation in December 2013 after stakeholders requested it to reconsider its position on the requirements on collateral diversi- fication set forth in § 43(e) of the Guidelines. What’s in there? On 24 March 2014, ESMA issued its final report on the revision of the Guidelines (the "updated Guidelines"). Their new provision should state that all UCITS may be fully collateralised in securities referred to in Article 54-1 of the UCITS Directive (e.g. government securities), to the extent that: « They receive securities from at least six different issuers; and « They comply with additional prospectus and an- nual report disclosure requirements. What’s next? The updated Guidelines would enter into force 2 months after publication. However, UCITS that would exist before the application date of the up- dated Guidelines would not be required to com- ply with the provisions relating to the prospectus transparency on collateral diversification until the earlier of: (i) the first occasion after the application date of the updated Guidelines on which the prospectus, having been revised or replaced for another pur- pose, is published; and THE DIRECTIVE IS AVAILABLE HERE.

1) What is a PRIIP? The Regulation does not include an exhaustive list of the vehicle in scope. PRIIPS are basically all type of vehicle available to retail investors which package exposure to assets purchased by the vehicle. The PRIIP landscape will be composed of investment funds, MiFID insurance-based products, structured securities and structured deposits not exclusively offered to institutional investors are covered by the Regulation. However corporate shares, sovereign bonds directly held by a retail investor as well as other insurance products and pension schemes are explicitly excluded from the scope of the Regulation. The Regulation applies to the Manufacturers and persons advising on or selling PRIIPs. It will thus typically impact fund managers, insurance under- takings, credit institutions and investment firms. 2) What shall I do if I am a Manufacturer? Manufacturers are responsible for: « Drawing up the KID in compliance with the strict requirements set out in the Regulation or moni- toring any service providers to which this duty is delegated; « Ensuring that the KID is provided free of charge to retail investor before the conclusion of the trans- action; « Establishing appropriate internal procedures as to (1) ensure investors have an effective way of submitting complaints and (2) process such com- plaint in a timely manner; and « Updating the KID and informing investors of any revised provisions. Manufacturers will also be required to update their marketing documentation as to indicate that a KID is available. « Publishing the KID on its website ;

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