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Update to Investment Services Rulebooks

On 4 January 2021, the Authority issued a circular relating to the European Securities and Markets Authority’s Guidance on investment funds’ performance fees, applicable to UCITS Management Companies and Alternative Investment Fund Managers managing Retail Alternative Investment Funds (the “Guidelines”). The Guidelines provide Fund Managers with information on the following areas:

  • the calculation methodology of performance fees;
  • the consistency between the performance fee model and the fund’s investment objectives, strategy and policy;
  • the crystallisation frequency of performance fees;
  • the negative performance (loss) recover; and
  • the disclosure methods of the performance fee model.

The respective Investment Services Rulebooks have been updated by making reference to the Guidelines issued.

Reminder on ‘Reverse Solicitation’ in the context of the end of the UK Transition Period

On 15 January 2021, the Authority issued a circular reminding MiFID Investment Firms of the MiFID II requirements on the provision of investments services and activities by third country firms, including how the notion of a client initiating the provision of an investment service “at its own exclusive initiative” should be understood and applied.

Firms are reminded that where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, any resulting provision of investment services should not be deemed as a service provided “at the own exclusive initiative of the client”.

Firms are also reminded that they can be subject to administrative and/or criminal proceedings when providing investment services without the proper authorisation in accordance with EU legislation and the national law applicable in Member States. Furthermore, when firms use services of other investment firms which are not properly authorised in accordance with EU and Member States’ law, their investors may lose protections and coverages granted under relevant EU rules and directives.

Conduct of Business Rulebook (the “COBR”) Revisions

On 20 January 2021, the MFSA issued informed the industry on revisions affected to the COBR. The newly added rules reflect the applicable requirements emanating from the ESMA guidelines on the knowledge and competence of staff. Furthermore, the definitions of ‘Complaints’ and ‘Subordinated Eligible Instruments/Liabilities’ have also been introduced in the Glossary section.

Circular on recent updates to the Authority’s Frequently-Asked-Questions concerning the reporting of Transparency information to the MFSA in terms of Articles 3 and 24 of the Alternative Investment Fund Manager Directive (the “FAQs”)

On 29 January 2021, the Authority issued a circular informing AIFMs that the FAQs have been updated. The revised and newly added questions address; actions that are expected to be taken by AIFMs after the submission is uploaded to the LH Portal, the reporting of leverage, and Common validation errors, and data quality issues.

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