investment compliance service presentation

Investment Compliance ServiceJune 2020

© 2020, Deloitte Tax & Consulting, SARL 22

Content

Setting the scene Our value proposition Conclusion


“In 2018, the CSSF received 1,852 declarations on the basis of Circular CSSF 02/77, compared to 1,791 declarations in 2017, representing an increase of 3.41% that is entirely attributable to non-compliance with investment rules.”

Even with regulation, guidelines and opinion pieces easily available, the CSSF noted a continued increase in Circular CSSF 02/77 declarations since 2014.

1,3381,551

1,738 1,791 1,852

0

500

1000

1500

2000

2014 2015 2016 2017 2018

NUMBER OF NOTIFICATIONS *

* Source: CSSF Annual Report 2018

Investment compliance under supervision1. Setting the scene


Obligations of governing bodies1. Setting the scene

The increased accountability and responsibility of IFMs/governing bodies, combined with an active supervisory authority, requires total due diligence and expert navigation of the rules applicable to the funds under management.

Responsibilities of Investment Fund Managers (IFM) and governing members of investment funds are many and varied, for instance:

• Determining the strategy to meet investment policy of the fund

• Choice of organisational model for the fund, its management and service providers

• Implementing the investment policy of the fund, in compliance with fund documentation, investor disclosures and law

• Being accountable and responsible to shareholders, regulator(s) and stakeholders of the fund

Competencies of IFMs and governing members consist of:

• Understanding a fund’s structure and roles and duties involved with respect to the specificities of the fund

• Possessing the skills and professional experience in relation to the types of funds and investment strategies under their management


Investment Compliance Service - Overview 2. Our value proposition

Set-up review and operational

governance health-check

Trainings and workshops

Eligibility of financial instruments and

markets

NAV error compensation

assistance

NAV Doctor support service


Zoom-in: Eligibility of financial instruments, markets and rule interpretations2. Our value proposition

Assess eligibility against applicable rules of markets, such as

• Over-The-Counter

• MTFs

• third-country markets

Consult externally

Issue opinions

Compliance with EU climate change and sustainability rules and disclosures

“Cold-testing” of portfolios with investment rules, limits and policy

Assess eligibility against applicable rules of complex securities and derivatives such as:

• Structured debts

• Exchange traded products

• MBS and ABS

Identify embedded derivatives

Perform look-through at underlyings

Consult externally

Issue opinions

• Assess index eligibility against ESMA and local guidelines/rules

• Test underlying components as eligible assets for UCITS

• Highlight of any points for attention

• Discuss with index providers points of attention on client’s behalf

• Support in further analyses needed

Compliance with EU climate change benchmark rules, disclosures, methodologies, exclusions, etc.

Complex securities & derivatives Markets, Climate change and Portfolio ETFs, indices and Benchmark rules

Initial and periodic assessments of transferable securities, derivatives, markets and ETF underlying indices


Zoom-in: Trainings and workshops – adapted to your needs2. Our value proposition

RegulationsActive breaches

Securitisation

Money Market Funds

Collateral requirements

Benchmarks

• The many regulations, limits and restrictions and how they interact with oneanother can often pose more questions than answers

• The Investment Compliance team can help you unravel and better understand theregulations, limits and restrictions, the effect they can have on one another andhow they can be applied to a situation you may be facing

• Deloitte shares the regulatory intelligence and commonly observed marketpractices to help you to make the most appropriate decisions for your particularsituation

• Simply state the situation you wish to be addressed such as “What disclosures do Ineed to make on sustainability in my funds”, along with any supportingdocumentation and Deloitte will prepare a response and follow ups wherenecessary

• Through this single point of contact you have access to the pool of Deloittespecialists in the area of investment compliance

Access Deloitte specialists and benefit from our experience of application and observed market practices

Restrictions

Limits

Climate change / Sustainability


Zoom-in: Set-up review and operational governance health-check2. Our value proposition

What controls are in place to ensure pre and post-trade eligibility?

Are your policies aligned with CSSF Circular 18/698?

Are your internal governance procedures up to date?

Have you performed detailed due diligence on delegates where compliance checks have been outsourced?

Policies and procedures relating to investment compliance must be up to date and capture the inherent risks associated with the funds managed

Deloitte can:

• Review your current internal control framework policy documents

• Suggest changes to align your practices with observed good governance as the best market practice

• Write policies on your behalf to capture current applicable rules and that are specific to you

• Assist and provide tools to perform due diligence on third-parties where investment compliance and corresponding checks have been outsourced

Circular CSSF 18/698Chapter 5 “Arrangements regarding the central administration and internal governance”

Chapter 6.3 “Organisation of the portfolio management function”


Zoom-in: NAV doctor support service / NAV error compensation assistance2. Our value proposition

1

2

3

Materiality concept / tolerance thresholds * :

• Money market UCIs/cash funds: 0.25% of NAV • Bond UCIs: 0.50% of NAV • Shares and other financial assets' UCIs: 1.00% of NAV • Mixed UCIs: 0.50% of NAV

De Minimis rule

UCIs are authorized by the CSSF to apply de minimis rules to the amounts to which individual investors can pretend (in order to avoid that investors who have a right to be paid lesser amounts, end up with no real benefit because of bank charges)

Reimbursement

No obligation as such for investor that benefitted from the NAV error to reimburse the funds.

* Promoters are on the contrary free to apply less high tolerance thresholds or even not apply any at all.

The CSSF 02/77 Circular provides guidance on the compensation process for the investors (or funds) in case a NAV error or active investment breach. The Central Bank of Ireland has also proposed rules for the “Treatment, Correction and Redress of Errors in Investment Funds” in its paper CP130. Deloitte can help on both.

NAV Doctor services:

• Assistance in evaluating the existence of an NAV error or an investment breach• Support in the determination of the financial impacts for the funds and its

investors (re-computation, re-calculation, economic approach, compound method, etc.)

• Support for the audit reporting obligations in accordance to the Circular 02/77• Drafting and review of internal procedures

NAV error compensation assistance:

• Preparation of notifications, compensation scheme for investors• Drafting compensation letter including the compensation details description• Compensation scheme coordination• Trainings


Focus on Sustainability and Your Data – Economies of Scale2. Our value proposition

Collection and assessment

Your Data - Economies of Scale

If you are already a user of other Deloitte services such as the KIID Factory, fund reporting services via Deloitte’s Data Solutions, some of the data needed to perform cold-testing of your funds may be available already!

Sustainability

With much focus on sustainable investments and increased demand from investors for ESG / SRI compliant investments, ensuring you meet the right criteria and make the correct disclosures on your products can be tricky and time consuming. Deloitte can help you make these determinations, examine your methodologies for ESG /SRI compliance and partner you along this evolving journey

Presenter

Presentation Notes

Update screenshot


Investment Compliance service – Your added value3. Conclusion

Our service

• Increasing complexity of assets and objectives, the use of derivatives, combined with increased regulation, have stretch the resources of many firms

• This service can assist clients across all manner of investment compliance areas

• The service forms part of the Regulatory Compliance Hotline service where the team also offers assistance with both Business and Marketing compliance

• Depending on the complexity of the request, we aim to respond on a timely basis of approximately 2 to 3 working days

Your added value

• Reallocate your valuable resources to other parts of your business

• Independent analysis/review of eligibility of financial instruments, markets, indices and governance policies and procedures

• Clarification of views and opinions on numerous regulations, guidelines, limits and restrictions such as benchmarks, securitisations, collateral requirements, sustainability aspects, global exposures and breaches

• Access to professionals across a wide range of areas and market practice observed

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/aboutto learn more.

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our global network of member firms and related entities in more than 150 countries and territories (collectively, the “Deloitte organization”) serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 312,000 people make an impact that matters at www.deloitte.com.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.

No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.

© 2020, Deloitte Tax & Consulting, SARL. Designed and produced by Marcom at Deloitte Luxembourg

Lou [email protected]+352 45145 2456

Virginie [email protected]+352 45145 2990

Nicolas [email protected]+352 45145 4911

Alice [email protected]+352 45145 2605

Anne [email protected]+352 45145 2797

Stuart [email protected]+352 45145 3934

http://www.deloitte.com/about

http://www.deloitte.com/about

http://www.deloitte.com/

investment compliance service presentation

Documents