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GET IN TOUCH
+1 (929) 566 2071contact@zeidlerlegalservices.com
International ServicesUS ServicesInsightsGet in touch
WE HELP US FUND MANAGERS WITH US SERVICES AND GOING GLOBAL
WHO ARE WE?
Zeidler Group is a leading tech-driven compliance and regulatory services
provider with a geo-neutral approach for the asset management industry. Let us
help you roll-out your investment strategies on a global scale
PACKAGES FOR US FUND MANAGERS
We make it simple to bring your business to a global stage with our range of
packaged services
Get in touch
VENDOR DUE DILIGENCE
* Access to customizable best-practice templates or bespoke questionnaires
* Efficiently manage questionnaire distribution, completion, and rating
* Thorough validation through online, telephone, or on-site methods
* Centralized process monitoring via Zeidler Swift
* Assurance of regulatory compliance including SEC 1940 Advisers Act, CP86 &
CSSF Circular 18/698
* Thorough validation through online, telephone, or on-site methods
* Web-based platform
MARKETING MATERIAL REVIEWS
* Get marketing material reviews in minutes and on-demand
* Trained and maintained by our specialist global team of investment fund
lawyers
* Covers SEC Marketing Rules, Securities Act, ESMA Guidelines, MiFID II, CBDR,
UK Marketing Communication Rules as well as national gold-plating
requirements
* Compare marketing materials against PRIIPs KIDs, Summary Prospectus and fund
prospectuses to ensure consistency
* Web-based platform
*
GLOBAL KNOWLEDGE HUB
* Provides practical information on Registration and Compliance matters for
UCITS and AIFs
* Also provides information on marketing, pre-marketing, private placement,
reverse solicitation rules for UCITS and AIFs
* Created & regularly updated by specialist lawyers
* Over 70+ jurisdictions available
* Includes support for queries via phone and email
* Web-based platform
Get in touch
FURTHER
US SERVICES
Need something else? We cover many other services and can create bespoke
services for any specific needs
Get in touch
Advertising & Marketing Review
Factsheet Generation & Review Services
Regulatory Filings & Assistance
Vendor Due Diligence
Compliance Trainings
Annual Review for Registered Investment Advisers
Code of Ethics Review
Environmental, Social and Governance (ESG) Compliance
ADVERTISING & MARKETING REVIEW
Marketing your fund is constantly evolving, from print ads to TikTok, now more
than ever there is a wide span of options for reaching potential and current
clients. Ensuring that your fund is following the rules and regulations
regarding advertising materials and marketing practices can be difficult as a
result. Zeidler Group can help with review services on specific advertisements
as well as on general marketing practices.
* We can review your advertising materials across any number of specific
mediums.
* We can pre-screen social media statements for compliance.
* Feel comfortable in our analysis and documentation for your records.
FACTSHEET GENERATION & REVIEW SERVICES
Factsheets are a core part of informing current and potential fund clients of
the status of your fund but can be cumbersome to update on a regular basis as
required. Zeidler Group can handle updating your factsheets in a robust and
continuous manner so you can focus on running your fund.
* We can update your factsheets to your specific templates.
* From simple data updating to complex format restructuring, Zeidler can
assist.
* We are implementing an automated platform for updating your Factsheets
without assistance.
* Feel confident in your factsheets with our review.
REGULATORY FILINGS & ASSISTANCE
Zeidler Group can help with a wide variety of regulatory filings – from the SEC
to the CFTC, we are here to help and provide guidance ranging from basic review
to comprehensive solutions. We understand that no two firms are identical, and
pride ourselves in tailoring services based on your specific needs.
* We can assist with your annual Form ADV updates.
* We have automated solutions for time-consuming manual forms like 13F.
* Never miss a deadline with our compliance calendar reminders.
* Feel confident in your filings with our review services.
VENDOR DUE DILIGENCE
We provide a digital Vendor Due Diligence solution to conduct initial and
ongoing due diligence that caters to the individual needs of each of our
clients, in line with regulatory requirements. We can help with all aspects of
the due diligence process including policy development, onboarding, review, and
validation.
Our services include:
* Providing access to our best-practice questionnaire template(s) or creating a
bespoke questionnaire that meets your specific needs.
* Managing the dissemination and completion of the questionnaire by the
vendor(s).
* Rating responses provided by vendors based on your risk rating priorities and
appetite.
* Providing advice on how to mitigate identified risks.
* Managing of the entire process through our proprietary platform Zeidler
Swift.
* Ensuring compliance with regulatory requirements. We closely track developing
changes in the markets, from the USA to the EU.
COMPLIANCE TRAININGS
Ensuring compliance in a firm is a team effort, with every member of a firm
needing to be involved. Whether you are a licensed as a Registered Investment
Advisor, a Broker-Dealer, Commodity Pool Operator, or other regulated entity,
you likely require specific trainings both on an ad-hoc and annual basis.
Zeidler can assist by providing compliance trainings in a way that fits best for
your specific situation.
* We can perform trainings on a wide spectrum of compliance topics within the
asset management industry.
* We offer in-person, remote, or pre-recorded sessions.
* Trainings are tailored specifically for your fund and colleagues.
ANNUAL REVIEW FOR REGISTERED INVESTMENT ADVISERS
Being a Registered Investment Adviser requires specialized compliance policies
and procedures to stay in good standing. Zeidler Group can help with ensuring
your firm is meeting all regulatory requirements and is prepared for emerging
regulatory changes, so you can focus on what you do best.
* We can handle reviewing your annual updates for Form ADV, including Part 2
Brochures.
* We can review your existing policies and procedures in light of upcoming
changes.
* We can provide feedback on existing policies, and even draft updated ones.
CODE OF ETHICS REVIEW
Under the Investment Adviser’s Act, all Registered Investment Advisers are
required to adopt and maintain a code of ethics. It is important to keep the
code of ethics updated, and in line with emerging SEC guidance. Zeidler can
assist with review services and monitoring the regulatory environment.
* We can draft updates to your existing code of ethics or assist in writing a
new one.
* We can ensure your code of ethics is digestible and understandable to your
staff and your clients.
* Feel confident in your compliance with our review.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) COMPLIANCE
ESG is an emerging and monumental development for the Asset Management industry,
and with it comes a brand-new slate of compliance requirements that are still
not well-defined. Zeidler is well posed to assist with your emerging ESG
compliance needs thanks to our well-established expertise in the highly
regulated European Union ESG space.
* We can keep you apprised of changes and implementations of ESG regulations in
the US.
* Preempt any regulatory concerns by following international best-practices for
ESG.
* Let us worry about the rapid changes in the space, so you can focus on
managing your fund.
Get in touch
ALREADY
INTERNATIONAL?
So are we. We have offices in London, Frankfurt, Dublin, Paris, Luxembourg,
Melbourne, Mumbai, and Winterthur (Switzerland)
Visit our international site
LOOKING TO GO GLOBAL?
From fund formation to daily fund governance and cross-border registrations, we
cover your legal, regulatory compliance and broader business needs via UCITS
Get in touch
Global Knowledge Hub
Ongoing Fund Governance
Cross-Border Registrations
Legal Management Investment Funds (Local Counsel Service)
Formation & Structuring of Investment Funds (Local Counsel Service)
GLOBAL KNOWLEDGE HUB
The Global Knowledge Hub is our proprietary web-based knowledge platform. It
provides access to practical information on Registration and Compliance matters
for UCITS and AlFs in multiple jurisdictions. This information has been created
and simplified by our in-house team of lawyers and subject specialists.
* Web-based platform
* Provides practical information on Registration and Compliance matters for
UCITS and AIF's
* Also provides information on marketing, pre-marketing, private placement,
reverse solicitation rules for UCITS and AlF's
* Created and regularly updated by specialist lawyers and subject experts
* Over 60 jurisdictions available now for UCITS and AlFs with more to come.
* Fixed annual fee and flexible subscription plans to suit your needs
* Includes support for queries via phone, email and chatbot
* Unlimited number of users
ONGOING FUND GOVERNANCE
Once the registration of funds is completed in your new jurisdictions, let us
take care of the ongoing fund governance.
* Managing regulatory filings
* Maintaining registration status by filing updated fund documents with both
home-state and host-state regulators
* Reporting on compliance matters
* Monitoring legal amendments and regulator updates.
CROSS-BORDER REGISTRATIONS
We support globally, with the registration of investment funds (UCITS and AlFs)
in the EU and EA proving extremely popular with our clients. We can also help
you realize the opportunities for European funds in jurisdictions outside of
Europe. Every year we carry out hundreds of fund registrations in 50+
jurisdictions.
* Passporting UCITS funds throughout 7 registering UCITS funds and Als for the
EU and EEA global distribution in jurisdictions such as Chile, Singapore,
South
* Passporting EU AlFs with EU AIFMs throughout the EU and EEA Africa and
Switzerland
* Registering non-EU AlFs or AlFs with non-EU AIMs for distribution under the
National Private Placement Regimes (NPPRs)
* Translating fund documents into multiple languages for filing with regulators
and distributing to investors.
LEGAL MANAGEMENT INVESTMENT FUNDS (LOCAL COUNSEL SERVICE)
Accept no excuses. Everyday activities should be extraordinarily streamlined.
Zeidler adds some zoom to investment funds law, with nimbler processes.
* Updating your prospectus or PPM, alongside memorandum and articles of
association
* Advising on day-to-day legal management of funds
* Reviewing service provideragreements
* Drafting corporate documents
* Organizing AGMs and EGMs
* Advising on eligible assets for UCITS
* Managing regulator relationships, such as with the CBl and CSSF.
FORMATION & STRUCTURING OF INVESTMENT FUNDS (LOCAL COUNSEL SERVICE)
From fund formation to daily maintenance and cross-border registrations. Benefit
from our dedicated legal expertise and range of legal efficiencies to best
structure and set up your investment funds.
* Discussing investment policy and target markets to determine the right
structure for your fund
* Drafting your fund's constitutional and offering documents
* Select a subject Company Message
* Negotiating and reviewing service provider agreements
* Managing your fund's creation, day-to-day
* Liaising with the regulator to obtain fund approval
Get in touch
GET IN TOUCH
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services, please fill in your details and we'll be in touch
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PHOENIX OFFICE
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development and operations. We're constantly expanding. Join us on this journey
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INSIGHTS
Our team of regulatory, compliance, software, and data experts actively monitor
the latest industry updates and provide practical advice and guidance
KEEP PACE WITH THE LATEST VIEWS, RESEARCH, UPDATES AND NEWS
Sign up for free
News
GLOBAL ETF SPECIALIST VANECK BECOMES NEW CLIENT FOR ZEIDLER GROUP’S AI-BASED
MARKETING MATERIAL REVIEW TOOL
18
July
2024
Views
HOW WILL THE SEC’S BAD SUMMER IMPACT THE INVESTMENT MANAGEMENT COMMUNITY?
16
July
2024
Views
REVOLUTIONIZING INVESTMENT MANAGEMENT DUE DILIGENCE: THE FUTURE OF VENDOR
OVERSIGHT
11
July
2024
Views
NAVIGATING SEC GUIDELINES: UNPACKING THE LATEST FAQS ON FUND PERFORMANCE
MARKETING COMPLIANCE
16
February
2024
Views
THE CORPORATE TRANSPARENCY ACT EXPLAINED: IS YOUR COMPANY REQUIRED TO REPORT?
23
January
2024
Views
INTRODUCING THE UPDATED EUROPEAN ESG TEMPLATE (“EET”) 1.1.21
17
January
2024
News
ZEIDLER GROUP ELEVATES US OPERATIONS WITH ADDITION OF FORMER ALLIANCEBERNSTEIN
SENIOR VICE PRESIDENT AND HEAD OF INTERNATIONAL LEGAL
16
January
2024
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ZEIDLER GROUP USHERS IN NEW ERA WITH APPOINTMENT OF EXECUTIVE VICE PRESIDENTS
11
January
2024
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CLASSIFICATION OF ICT-RELATED INCIDENTS UNDER DORA
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10
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Show more
News
GLOBAL ETF SPECIALIST VANECK BECOMES NEW CLIENT FOR ZEIDLER GROUP’S AI-BASED
MARKETING MATERIAL REVIEW TOOL
18
July
2024
Kate Horgan
BREAKTHROUGH LARGE LANGUAGE MODEL (LLM) TECHNOLOGY SET TO REVOLUTIONIZE
COMPLIANCE PROCESSES FOR INVESTMENT FUND MARKETING MATERIALS
New York, United States, July 18 2024 -Global ETF Specialist VanEck Becomes
New Client for Zeidler Group’s AI-based Marketing Material Review Tool
Like every fund manager of a certain size, VanEck produces large volumes of
marketing materials including fund fact sheets, brochures, and pitch books to
market its ETF products in many different countries. The content and
presentation of these materials are subject to the rules and regulations of each
country where the marketing materials are circulated.
VanEck will now use the Marketing Material Review Tool (MMR-Tool) to
automatically review investment fund marketing materials for compliance in each
relevant country. In addition to understanding local laws, the MMR-Tool can
ingest marketing materials in different languages.
Developed and trained by Zeidler Group’s legal experts and software engineers in
a year-long project, the MMR-Tool exemplifies how law and technology can be
combined in the era of Large Language Models.
The MMR-Tool offers significant benefits, including reducing manual review time
and enhancing the accuracy of compliance checks, which is crucial for
maintaining the integrity of investment fund communications on an international
scale.
Large Language Model technology represents a paradigm shift in how investment
fund and legal documents can be reviewed and processed, offering capabilities
that range from understanding context, interpreting graphs, charts and images to
ensuring compliance with necessary legal standards.
Arne Zeidler, CEO & Founder at Zeidler Group, said:
“We are thrilled to welcome VanEck as our latest client for the MMR-Tool. This
partnership is a testament to the trust and value our solutions bring to the
investment fund industry. VanEck is challenging the status quo and is an early
adopter of next-generation technology in the legal and compliance space. We
predict that within less than a year, it will be the industry standard to use
AI-based applications to review marketing materials.”
Sabrina Giagheddu, Senior Legal Counsel at VanEck, added:
“Partnering with Zeidler Group allows us to harness cutting-edge LLM technology,
trained by lawyers, to enhance our compliance operations. Their solution offers
us a significant advantage in managing the complexities of analyzing fund
marketing materials for regulatory adherence.”
With the partnership between Zeidler Group and VanEck now official, Zeidler
Group reaffirms its dedication to using AI to enhance compliance processes
across the investment fund sector.
EXPERIENCE THE MMR-TOOL IN ACTION
BOOK YOUR PERSONAL DEMO TO WITNESS THE MARKETING MATERIAL REVIEW TOOL REVIEW
MARKETING MATERIALS IN REAL-TIME.
ABOUT VANECK
VanEck has a history of looking beyond the financial markets to identify trends
likely to create impactful investment opportunities. We were one of the first
U.S. asset managers to offer investors access to international markets. This set
the tone for the firm’s drive to identify asset classes and trends – including
gold investing in 1968, emerging markets in 1993, and exchange-traded funds in
2006 – that subsequently shaped the investment management industry.
Today, VanEck offers active and passive strategies with compelling exposures
supported by well-designed investment processes. As of March 31, 2024, VanEck
managed approximately $101.9 billion in assets, including mutual funds, ETFs,
and institutional accounts. The firm’s capabilities range from core investment
opportunities to more specialized exposures to enhance portfolio
diversification. Our actively managed strategies are fueled by in-depth,
bottom-up research and security selection from portfolio managers with direct
experience in the sectors and regions in which they invest. Investability,
liquidity, diversity, and transparency are key to the experienced
decision-making around market and index selection underlying VanEck’s passive
strategies.
Since our founding in 1955, putting our clients’ interests first, in all market
environments, has been at the heart of the firm’s mission.
ABOUT ZEIDLER GROUP
Zeidler Group is a technology-driven law firm and provider of legal and
compliance services, revolutionising legal, regulatory, compliance, and
reporting services for the asset management industry. Zeidler Group fosters
collaborative, strategic partnerships by delivering innovative digital solutions
and bespoke, research-based legal advice and regulatory guidance. The firm
serves more than 250 clients with aggregate assets under management exceeding
USD 1.5 trillion, including some of the industry’s largest and most respected
names, as well as boutique operators.
Views
HOW WILL THE SEC’S BAD SUMMER IMPACT THE INVESTMENT MANAGEMENT COMMUNITY?
16
July
2024
Scott Parkin
This summer has been tumultuous for the SEC, with potentially significant short-
and long-term implications for the investment management sector.
WHAT HAPPENED?
It began on June 5th when the 5th Circuit Court took a chainsaw to the SEC’s
Private Fund Rules by vacating the rules in their entirety. What makes the
ruling extra painful is the court’s legal justification. The court ruled that
the entire promulgation of the rules –including the SEC’s legal basis for how it
could regulate private funds – exceeded the SEC’s statutory authority under the
Advisers Act. Ouch…
The SEC Private Fund Rules were supposed to be one of Chairman Gensler’s
crowning achievements by imposing retail-like disclosure requirements to private
funds – the rules being characterized as an attempt to protect investors from
riskier investments in hedge funds, private equity funds etc. While there was
much rejoicing from the private fund industry, the SEC stared at their first
real limitation on regulating private funds in a long time.
Fast forward a few weeks and the Supreme Court was prepared to issue its rulings
on a variety of high-profile cases. The first came on June 27th when the
Supreme Court ruled in favor of Mr. Jarkesy in SEC v. Jarkesy. While this case
did not get the same media attention as Chevron or others, this ruling was a
long-awaited result for people involved in SEC enforcement issues. From a very
high level, the ruling gutted the SEC’s ability to use administrative
proceedings when seeking civil penalties for securities fraud. The immediate
impact to an investment manager is meaningless unless you are caught up in a
securities fraud finding by the SEC, but the ruling is another example of the
SEC’s historical methods of operations being fundamentally altered.
Lastly (at least at the time of writing this) is Chevron. The Supreme Court’s
ruling in Loper Bright Enterprises v. Raimondo, where it overturned Chevron and
eliminated the so-called Chevron Deference, is an unparalleled change to
administrative law that had existed for over 40 years (40 years and 3 days to be
precise). In layman’s terms, Chevron Deference allowed agencies like the SEC to
have authority for interpreting ambiguities in the regulation it writes and
courts must defer to their interpretation.
WHAT DOES THIS MEAN?
The impacts of this decision will be felt for decades, at least, and will touch
every aspect of how US federal agencies operate. For the SEC in particular, it
is not known what the impacts will be tomorrow. There are endless examples of
SEC decisions and interpretations of its rules whereby Chevron would be relied
on if challenged. Agencies do no state they are using Chevron when implementing
or interpreting their rules, but they know they have (well, had) the protection
of Chevron in the background.
IMPACT ON INVESTMENT MANAGERS
I think everyone can agree that the SEC is weaker today than it was before the
summer and it is likely these rulings will slow, if not significantly limit, the
SEC’s future rulemaking.
Even if some of the rulings, particularly the vacating of the Private Fund
rules, were expected, the SEC likely needs to proceed with more caution than
before. While none of the rulings change the SEC’s legislative obligation to
regulate the securities market, if the SEC wants to propose new rules, they must
be careful. The SEC knows that for any new rule market participants – now
emboldened by the Private Fund rules result – will challenge the rules in court
or challenge the SEC’s interpretation and enforcement of it. It’s akin to a
pre-and post-trade investment compliance check. Any new rule will be at risk
before and after adoption.
While less rulemaking is typically good for the investment management community,
there is a flip side to this regulatory coin. Throughout the SEC’s history,
there have been periods where, instead of rulemaking, it focused on “regulation
by enforcement”. This is the concept where the SEC uses enforcement proceedings
to change existing regulations. While Jarkesy limited the SEC’s ability to use
administrative proceedings instead of civil trials, the SEC’s authority to
enforce securities law has not been limited.
Enforcement may be slower when there are civil trials instead of administrative
proceedings, but it is enforcement all the same. In a post-Chevron world, the
SEC will need to be mindful of what types of enforcement it takes because often
the justification for such enforcement is based on its interpretation of
securities regulation.
While Jarkesy and Loper Bright severely limited the SEC’s enforcement and
interpretive abilities, the ruling on the Private Fund rules may have the most
immediate impact by slowing rulemaking and therefore pushing the SEC to use
“regulation by enforcement”. It is a highly probable outcome that SEC
enforcement actions increase going forward to further the current SEC’s agenda.
But alas, as such is the case in America, the upcoming election could
drastically change that agenda.
Conclusion
In conclusion, the SEC faces a challenging landscape post-summer, with reduced
rulemaking abilities and a potentially stronger focus on enforcement actions.
For investment managers, adapting to these changes will be crucial in navigating
the evolving regulatory environment. If you have any questions or require
support, the Zeidler’s Team are here to assist. Our global team of professionals
stays current on the latest legal, regulatory, and compliance changes affecting
the asset management industry. For additional information or assistance, please
get in touch with us.
Views
REVOLUTIONIZING INVESTMENT MANAGEMENT DUE DILIGENCE: THE FUTURE OF VENDOR
OVERSIGHT
11
July
2024
Scott Parkin
INTRODUCTION: THE NEED FOR MODERNIZATION IN DUE DILIGENCE
For decades, US investment managers have relied on a combination of manual
processes and extensive use of Excel spreadsheets to conduct initial and ongoing
due diligence on outsourced activities. Despite regulatory pressures and
evolving market practices that demand more sophisticated systems, many managers
continue to handle due diligence manually. It’s time to address the proverbial
elephant in the room: Do investment managers need to evolve or modernize their
due diligence processes now?
WHAT’S CHANGING IN DUE DILIGENCE?
SEC’S PROPOSED RULES ON OUTSOURCED ACTIVITIES
In 2022, the SEC proposed rules on overseeing outsourced activities and
importantly focused on “Covered Functions”. This highlighted areas where the SEC
believes expanded oversight is needed for vendors. These Covered Functions
encompass the core activities that managers typically outsource. The proposed
rules suggest a comprehensive overhaul of the current due diligence framework,
pushing managers towards a more structured approach. Although the rules have not
been finalized, the momentum and regulatory signals suggest they will be enacted
soon, mandating robust, auditable, documented, and reportable procedures for all
aspects of vendors’ services.
EUROPE’S ADVANCED REGULATORY STANDARDS
European regulators have long established stringent due diligence requirements.
US managers, especially those with European operations, are familiar with these
rigorous standards. While the US does not always mirror Europe’s regulatory
environment, there’s a growing trend toward adopting similar vendor due
diligence practices. Enhanced oversight is universally recognized for mitigating
risk, and this shift is gaining traction in the US market.
THE FUTURE: MORE OVERSIGHT AND COMPREHENSIVE DUE DILIGENCE
Combining the US regulatory movement with European standards, the future of due
diligence is clear: increased oversight, more structured processes, and a
comprehensive due diligence framework are essential. Investment managers must
adapt to these changes to stay compliant and minimize risks effectively.
EMBRACING MODERN SOLUTIONS: ZEIDLER DUE DILIGENCE TOOL
INTRODUCING ZEIDLER DUE DILIGENCE (ZDD)
Zeidler Due Diligence (ZDD) —a game-changer for investment managers. Our
innovative, web-based platform transforms the entire due diligence process,
allowing managers to streamline and centralize vendor due diligence management.
KEY FEATURES OF ZDD:
* Comprehensive Questionnaire Management: ZDD enables managers to upload and
manage all types of due diligence questionnaires in one place, facilitating
seamless vendor responses.
* Customization and Automation: The tool offers extensive customization of
questionnaires and automates routine tasks, including vendor reviews,
follow-ups, and monitoring. This automation reduces manual work and enhances
efficiency.
* Advanced Reporting and Monitoring: ZDD supports a wide range of reporting
features, such as response rates, risk ratings, and specific areas of
concern. Reports can be generated instantly, aiding fund boards, audits, and
general reviews.
WHY CHOOSE ZDD?
ZDD is more than just a due diligence tool; it is a one-stop solution for
managing all vendor due diligence processes. It ensures compliance with upcoming
SEC rules as well as European rules including CP86 and CSSF Circular 18/698 and
ultimately prepares investment managers to future-proof their operations.
CONCLUSION: FUTURE-PROOF YOUR DUE DILIGENCE WITH ZEIDLER DUE DILIGENCE (ZDD)
As regulatory expectations tighten and the demand for robust due diligence
increases, Zeidler Due Diligence (ZDD) emerges as the essential tool for
investment managers. ZDD simplifies due diligence processes, enhances
compliance, and provides the structured framework needed to meet future
challenges.
Don’t wait until new regulations catch up with you—embrace ZDD today to stay
ahead in the evolving landscape of investment management.
BOOK A DEMO
Ready to revolutionize your due diligence process? Book a demo of ZDD now and
see how it can transform your compliance and oversight procedures.
NEED ASSISTANCE? WE’RE HERE TO HELP
If you have any questions or require support, the Zeidler’s Due Diligence,
Legal, and Regulatory Team are here to assist. Our global team of professionals
stays current on the latest legal, regulatory, and compliance changes affecting
the asset management industry. For additional information or assistance, please
get in touch with us.
Views
NAVIGATING SEC GUIDELINES: UNPACKING THE LATEST FAQS ON FUND PERFORMANCE
MARKETING COMPLIANCE
16
February
2024
Madeline Gegg
Earlier this month, the SEC published an updated version of its Marketing
Compliance Frequently Asked Questions (FAQ). The FAQ clarifies the provisions of
the Marketing Rule (the Rule), covering fund performance marketing requirements
related to the use of subscription lines. The SEC occasionally updates this FAQ
to include additional responses from the Division of Investment Management
staff. However, it is important to note that the FAQs are not statements from
the SEC itself.
The newly added question is:
Must gross and net performance shown in an advertisement always be calculated
using the same methodology and over the same time period?
In short, yes.
This question arises in response to the Marketing Rule provision that mandates
accompanying gross performance presentations with net performance. These
presentations should be calculated over the same time period and using the same
type of return and methodology. The Rule also requires that net performance is
presented in a format designed to facilitate comparison with gross performance.
The updated FAQ focuses on how private funds may wish to present the gross
internal rate of return (Gross IRR) and the net internal rate of return (Net
IRR). The concern is that the Net IRR may be inflated compared to the Gross IRR
due to differences in the time period and methodology used. For example, if the
Gross IRR is based on a period during which the fund relies on lines of credit
and does not reflect fund borrowing or subscription facilities, presenting the
Net IRR including the impact of subscription facilities is inconsistent and
therefore in violation of the Rule. As a result, the Net IRR can be inflated, an
effect the SEC seems eager to discourage.
As provided in the FAQ, the types of fund-level subscription facilities
contemplated include subscription line financing, capital call facilities,
capital commitment facilities, bridge lines, or other indebtedness incurred by a
private fund. The inclusion of subscription facilities in the Net IRR but not
the Gross IRR could also be construed as a use of different methodology as well
as different time periods.
This FAQ helps clarify this aspect of the Rule, which does not prescribe the
methodology to be used when an advertisement presents net and gross performance.
The FAQ advises considering disclosures that discuss the impact of subscription
facilities on the Net IRR that is shown.
Based on this new addition to the FAQ, it is advisable for private funds to
seriously consider the manner in which they choose to present net and gross
performance. Several display methods can ensure the proper disclosures,
including:
* Displaying Gross and Net IRR both commencing from a time prior to the time
that capital commitments were called from investors if that is when the
display of Gross IRR begins; or
* Showing four sets of data – Gross and Net IRR both with and without the
impact of subscription facilities, so four sets of performance.
Understanding and working within the parameters of the Rule is essential for SEC
compliance, and the published FAQ provides valuable insight into the best path
forward for private funds. The industry has taken up marketing and advertising
material as a concern on a global level, so understanding whether your materials
comply is crucial for fund managers.
If you have questions about this newly published guidance in the FAQ, please
reach out to our team! For any queries or support for your regulatory and
compliance needs, get in touch with our team of specialists.
Views
THE CORPORATE TRANSPARENCY ACT EXPLAINED: IS YOUR COMPANY REQUIRED TO REPORT?
23
January
2024
Madeline Gegg
In 2021, Congress passed the Corporate Transparency Act (CTA) which obliges
reporting companies to submit a Beneficial Ownership Information Report (BOI
Report) to the Financial Crimes Enforcement Network (FinCEN). The goal of the
new requirement is to limit an individual’s ability to mask or benefit from
their gains through shell companies or other ownership structures.
KEY DATES FOR BOI:
FinCEN began accepting BOI Reports on January 1, 2024, but the first deadline is
not until January 1, 2025 for companies that were created or registered before
January 1, 2024. For newer companies, specifically those that are created or
registered after January 1, 2024, they will have 90 days after receiving notice
of their creation or registration to file their reports. Companies created or
registered on or after January 1, 2025 will have 30 days to report after
receiving notice of their registration or creation.
INFORMATION INCLUDED IN THE BOI REPORT:
The BOI Report includes a variety of information about company applicants and
beneficial owners, including names, addresses, and contact information. While
the BOI Report itself is not very onerous, determining whether your company
qualifies for the reporting requirements can be a challenge, especially for
companies domiciled outside the United States but authorized to conduct business
in the United States. Unless an exemption applies, reporting companies include a
corporation, an LLC, or a company that was otherwise created in the United
States by filing a document with a secretary of state or any similar office, or
a foreign company that is registered to do business in any U.S. state.
UPDATE REQUIREMENTS:
In addition to the initial BOI Report, companies are required to update or
correct their BOI Reports as necessary. The threshold for needing to update the
BOI report is low- if there is any change to the required information the
company must file an updated BOI Report within 30 days of the date when the
change occurred. The same applies for discovering inaccuracies in the BOI
Report.
EXEMPTIONS TO REPORTING REQUIREMENT:
As mentioned, there are several exemptions from the reporting requirement (23,
to be exact). Three that may be pertinent are the exemptions for broker dealers,
investment companies or advisers, and for pooled investment vehicles.
* To qualify for the broker dealer exemption, an entity must be a broker or
dealer as defined in the Securities Exchange Act of 1934.
* To qualify for the investment company or investment adviser exemption, the
entity must be defined as an investment company or an investment adviser and
must be registered with the SEC as such.
* To qualify for the pooled investment vehicle, an entity must meet two
criteria:
* Either be a registered investment company under the Investment Company Act of
1940 or be a company that would be an investment company but for qualifying
for a Section 3(c)(1) or 3(c)(7) exemption from the registration requirements
of the Investment Company Act of 1940; and
* Is operated or advised by another exempt entity such as a bank, credit union,
Broker or Dealer in securities, investment company or investment adviser, or
venture capital adviser.
SPECIAL RULE FOR FOREIGN POOLED INVESTMENT VEHICLES:
Another key point to note is that there is a special rule for foreign pooled
investment vehicles. An investment pool formed under the laws of another country
but that would otherwise be a reporting company if not for the pooled investment
vehicle exemption has limited reporting requirements. These entities need only
report on one individual who exercises substantial control over the company.
CTA COMPLIANCE AND ASSISTANCE:
Above all complying with CTA requirements can be intricate, especially for new
entities. Our US team is here to help answer your questions, address filing
concerns, and ensure a smooth compliance process. Reach out to us for expert
guidance and ease your worries about reporting obligations.
Views
INTRODUCING THE UPDATED EUROPEAN ESG TEMPLATE (“EET”) 1.1.21
17
January
2024
Kwame Taylor
Note to US Citizens: Please note that this article is not intended to constitute
legal advice to any citizen or resident of the United States of America.
UNDERSTANDING THE EET
The European ESG Template (“EET”) is not a compulsory reporting tool, but it
plays a crucial role in the European financial industry. Developed by FinDatEx,
a technical working group, the EET serves as a standardized format for sharing
ESG data. While it aligns with the Sustainable Finance Disclosure Regulation
(“SFDR”) and related acts, its main purpose is to facilitate the communication
of ESG characteristics by funds, especially to distributors. This exchange of
ESG data is helpful in assessing compliance with the SFDR and other European
Financial Market Regulations, ensuring consistency in ESG data across various
platforms and aiding in the sustainability assessment of funds. The EET
encompasses different reporting levels based on SFDR articles (Article 6, 8, and
9).
IMPACT AND SCOPE OF EET
The EET particularly impacts financial market entities under Article 2 of
Regulation (EU) 2019/2088. Although not a regulatory requirement, the EET is
necessary for all products marketed in the European Union, aiding distributors
in identifying sustainable investment options. This encompasses funds classified
under Articles 6, 8, and 9 as per SFDR Level 1 and the Regulatory Technical
Standards (“RTS”). It’s important to note that the EET disclosure requirements
vary depending on the ESG traits of each financial product.
WHO USES THE EET?
The primary users of the EET include Product Manufacturers, Fund Distributors,
and Financial Advisers. These entities need the EET for SFDR reporting and to
align fund selections with sustainable preferences under the Insurance
Distribution Directive (“IDD”) and the Markets in Financial Instruments
Directive (“MiFID”).
RECENT UPDATES TO THE EET
The EET template has evolved from version 1.1.1 to 1.1.2, reflecting ongoing
changes in the industry and aiming to enhance its clarity and usability. As of
20 December 2023, FinDatEx released the 1.1.2 version. This update, while not
extensive, introduces key changes essential for consistency and reporting.
These include typographical corrections, a change in the Transitional Scope
Fields from “Mandatory/Conditional” to “Optional,” and the introduction of new
data fields like “30000_PAI_Snapshot_Frequency” and
“70010_Financial_Instrument_Total_Fund_NAV_Or_Notional.”
More significant amendments have been postponed to a future date.
IMPLEMENTATION TIMELINE
The latest EET template, version 1.1.2, is available since 31 December 2023 and
will be mandatory for Entity Level Reporting by March 2024.
ASSISTANCE AND CONTACT INFORMATION
Our team is well-equipped to assist clients with the production, validation, and
dissemination of the EET, offering expertise and support to navigate these
reporting requirements with clarity and precision.
Reach out to us at ESGServicesDivision@zeidlerlegalservices.com for more
information.
DOWNLOAD A COPY OF OUR EET GUIDE HERE.
News
ZEIDLER GROUP ELEVATES US OPERATIONS WITH ADDITION OF FORMER ALLIANCEBERNSTEIN
SENIOR VICE PRESIDENT AND HEAD OF INTERNATIONAL LEGAL
16
January
2024
Kate Horgan
Phoenix, AZ, 16 January 2024 – Zeidler Group proudly announces the appointment
of Scott G. Parkin as the Head of US, marking a significant stride in fortifying
the asset management servicing firm’s presence within the United States.
Based in the firm’s Phoenix office, Mr. Parkin assumes a pivotal role in
directing the regulatory and compliance landscape for Zeidler Group’s expansion
strategy across North America. His responsibilities encompass steering the
provision of regulatory compliance guidance for US asset management firms both
domestically and internationally as well as fostering the growth of Zeidler
Group’s US-specific services for the fund’s industry.
With a distinguished legal career spanning over 12 years, Mr. Parkin, a seasoned
US-qualified attorney, brings a wealth of expertise gained from pivotal roles in
leading US financial firms including AllianceBernstein and HSBC Global Asset
Management (US).
Reporting to Serena Goldberg, Executive Vice President of Products and Services
at Zeidler Group, Mr. Parkin’s appointment underscores the company’s commitment
to leveraging top-tier talent to enhance its client delivery and suite of fund
solutions.
Serena Goldberg, Executive Vice President of Product and Services said:
“Scott’s in-depth and nuanced understanding of investment funds law in global
jurisdictions, coupled with his extensive background in navigating the intricate
legal landscape, is a significant asset to our team. We anticipate his strategic
insights will further bolster our provision of comprehensive fund solutions. I
am delighted to welcome him to the team.”
Expressing his enthusiasm, Scott Parkin, Head of US at Zeidler Group, remarked
“Joining Zeidler Group at this exciting juncture, where the demand for
specialized investment funds legal counsel is burgeoning, is an exciting
prospect. I’m keen to leverage the firm’s innovative digital RegTech and
compliance solutions and research-driven counsel, further solidifying and
expanding Zeidler Group’s position as the asset management industry’s premier
destination. Having led a large and global legal team for AllianceBernstein, I
am thrilled to use my experience to show US firms how valuable and successful
Zeidler Group’s services can be.
Arne Zeidler, CEO & Founder of Zeidler Group, commented on the appointment,
stating:
“Scott is an esteemed investment funds lawyer with a wealth of practical wisdom
gained in the US and the EU. His profound grasp of European and US investment
funds law as well as Zeidler Group’s unique value proposition amplifies our
capabilities, ensuring superior regulatory compliance services for our valued
clients. We extend a warm welcome to him.”
About Zeidler Group
Zeidler Group is a technology-driven law firm and compliance provider
revolutionizing legal, regulatory, and compliance services for the asset
management industry. Zeidler Group builds collaborative, strategic, and
meaningful partnerships through its provision of innovative digital solutions
and bespoke research-based legal advice and regulatory guidance. Zeidler Group’s
range of asset management clients includes some of the largest and most
respected names in the industry, as well as boutique operators. The law firm
services more than 250 clients with aggregate assets under management above USD
1.5 trillion.
For more information, visit: zeidler.group.
News
ZEIDLER GROUP USHERS IN NEW ERA WITH APPOINTMENT OF EXECUTIVE VICE PRESIDENTS
11
January
2024
Kate Horgan
London, UK, 11 January 2024 – Zeidler Group, a pioneering force in LegalTech,
RegTech, and legal services for the asset management industry, proudly announces
a historic moment in its trajectory. The company heralds the elevation of two
exceptional colleagues to the esteemed position of Executive Vice President,
marking a monumental stride towards fostering innovation and achieving
unparalleled client delivery and excellence.
"Today marks a monumental milestone for Zeidler Group," remarked Arne Zeidler,
CEO & Founder of Zeidler Group. "The appointment of Serena Goldberg and Prashant
Patil as Executive Vice Presidents embodies our commitment to fostering
innovation and cultivating top-tier leadership within our organization. Their
vision, commitment and expertise will propel us to new heights of success."
Serena Goldberg, in her newly appointed role as Executive Vice President of
Products and Services, spearheads the firm’s AI integration across the group.
Her primary mission is to implement a cohesive, AI-driven strategy that enhances
our product and service offerings. Serena will lead in the integration of
artificial intelligence into our legal, ESG, reporting, and regulatory
offerings, driving the creation of innovative AI strategies that enhance our
suite of products and services while meticulously aligning with client needs.
Prashant Patil steps up as Executive Vice President of Technology, bearing the
critical responsibility for the successful technical implementation of Zeidler
Group’s new AI and tech-infused products and services. He is tasked with
ensuring the firm's technical infrastructure is reliable, safe, and effectively
supports the company’s strategic vision and service delivery. His role also
encompasses developing robust cybersecurity policies, overseeing IT procurement,
and ensuring compliance with relevant data and tech use regulations. Prashant’s
visionary approach has previously led to the successful and seamless integration
of all ten fund solution modules as part of Zeidler Group’s proprietary
platform, Zeidler Swift.
Serena Goldberg, Executive Vice President of Product and Services, expressed her
enthusiasm:
"Taking on the role of Executive Vice President of Product and Services at
Zeidler Group fills me with tremendous pride. Our focus on AI integration
signifies a transformative shift in our suite of fund solutions, aiming not only
for innovation but also for a profound enhancement of our product and service
offerings. I am eager to lead our teams towards a future where AI-driven
strategies redefine client excellence."
Prashant Patil, Executive Vice President of Technology, echoed this enthusiasm:
"As the Executive Vice President of Technology, I am thrilled to spearhead the
technical evolution at Zeidler Group. Our unwavering commitment to robust
infrastructure and cutting-edge digital solutions will provide greater value to
our clients. The integration of AI technology into our solutions will not only
support our global vision but also drive greater efficiency and security in an
ever-evolving proprietary platform Zeidler Swift.”
In addition to the promotion of Serena and Prashant, Maximilian Harper now holds
the dual roles of Chief Operating Officer and Chief Delivery Officer. Max's
extensive experience in investment funds law and client delivery, coupled with
his operational expertise, strengthens the firm’s management team.
Maximilian Harper, newly appointed Chief Operating Officer and Chief Delivery
Officer stated:
"As I step into the dual roles of Chief Operating Officer and Chief Delivery
Officer, my foremost goal is to amplify our client experience. By streamlining
operations and enhancing delivery mechanisms, we aim to fortify our commitment
to clients' needs, ensuring swift and precise support, and ultimately, elevating
their journey with Zeidler Group."
Zeidler Group's strategic appointments and restructured leadership underscore
its unwavering dedication to innovation, client-centric excellence, and
pioneering digital advancements within the asset management servicing industry.
With a focus on transformative leadership, cutting-edge AI technology, and an
unyielding commitment to client satisfaction, Zeidler Group is poised to embark
on a new era of unparalleled growth and client service excellence.
About Zeidler Group
Zeidler Group is a technology-driven law firm and compliance provider
revolutionizing legal, regulatory, and compliance services for the asset
management industry. The firm establishes collaborative, strategic, and
meaningful partnerships by delivering innovative digital solutions and bespoke
research-based legal advice and regulatory guidance. Zeidler Group's clientele
includes some of the largest and most respected names in the industry, alongside
boutique operators, serving over 250 clients with aggregate assets under
management exceeding USD 1.5 trillion.
For more information, visit: Zeidler Group.
Podcast
NAVIGATING THE NEXUS: DECODING THE US REGULATORY LANDSCAPE
29
November
2023
Join Kate Horgan, Business Development Manager at Zeidler Group, as she hosts
the latest episode of the Legal Zeidgeist podcast. Get ready for an insightful
exploration of the intricate US regulatory landscape. Kate is accompanied by
Zeidler Group colleagues, Madeline Gegg and Alex Mercer, both Associates based
in Zeidler’s Phoenix office. Together, they navigate the maze of Federal, State,
and Self-Regulatory Organizations.
In this podcast episode, gain clarity on the multifaceted regulatory system.
Madeline and Alex simplify the complexities by discussing crucial entities such
as the SEC, CFTC, state-specific variations, and key players like FINRA. Dive
into invaluable insights into the intricate US regulatory framework and discover
essential strategies for achieving comprehensive compliance within the financial
industry.
Whitepaper
FIRST YEAR OF ENTITY LEVEL DISCLOSURES
10
November
2023
Katrina Crampton
Note to US Citizens: Please note that this article is not intended to constitute
legal advice to any citizen or resident of the United States of America.
Navigate the dynamic ESG regulatory landscape, with our latest ESG whitepaper.
Our ESG experts delve into critical ESG themes that are redefining the
narrative:
* Explore the importance of Principal Adverse Impacts (PAIs) and their
influence on your ESG strategy.
* ESRS Demystified: Unveil the intricate connection between PAIs and the
European Sustainability Reporting Standards (ESRS), unlocking their mutual
influence.
* Best Practices & Real-world Insights: Immerse in practical case studies,
absorb best practices, and arm yourself with actionable insights to elevate
your ESG reporting.
Position yourself at the forefront of ESG excellence with our guide to mastering
the nuances of ESG reporting.
DOWNLOAD NOW
News
ZEIDLER GROUP LAUNCHES ENHANCED TRANSACTION COSTS CALCULATIONS SERVICES
8
November
2023
Kate Horgan
New York, 8 November 2023 – Zeidler Group, a prominent provider of cutting-edge,
digitally innovative fund solutions for the asset management industry, is
delighted to announce the introduction of its enhanced transaction cost
calculation services. This latest offering is designed to streamline operations,
enhance compliance, and improve transparency, particularly concerning costs and
charges, addressing critical considerations within the asset management
industry.
Zeidler Group’s automated transaction cost calculation solution optimises
transaction cost calculation processes, offering asset managers a fully managed
and innovative solution that streamlines the calculation process from data
ingestion to the delivery of final results. This advancement offers numerous
benefits to asset managers, enhancing the efficiency of production processes and
the subsequent distribution of data into the market.
Gemma Capelo, Head of Reporting Services Division, at Zeidler Group, stated:
“Our latest enhancement presents an exciting opportunity for us to ensure our
clients succeed with responsive tech-driven solutions. With our clients’
requirements and the wider asset management industry’s key considerations in
mind, we are delighted to provide a standalone, automated end-to-end, fully
managed solution for calculating clients’ transaction costs in line with
applicable regulatory requirements. In addition, as the need for an all-in-one
fund solution service provider continues, we intentionally strive to innovate
and enhance our reporting solutions with the future in mind.”
KEY FEATURES OF THE ENHANCED TRANSACTION COST CALCULATION SOLUTION INCLUDE:
* Automated Calculation Engine: Our cutting-edge automated calculation engine
ensures real-time validation of data inputs, error detection, and a
user-friendly interface for reliable results.
* Comprehensive Compliance: Our reporting team guarantees accurate transaction
cost calculations in line with PRIIPs/MiFID II ex-post and MiFID II ex-ante
requirements.
* Customizable Calculation Models: Tailor your calculations with options like
the “Arrival Price” Methodology (EU and UK) and the “New PRIIPs” Methodology.
* Scalability and Integration: Our solution scales to your needs, offering
seamless integration with data sources for real-time calculations.
* Enhanced Automation: Customize automated processes to manage transaction
results with client-specific thresholds and exception handling.
* Streamlined Data Management: Utilize Secure File Transfer Protocol (SFTP) for
data delivery with no specific file format requirements, reducing operational
hassles.
* Quality Assurance: Rigorous validation at all stages ensures accuracy and
reliability of outputs.
* User-Friendly Interface: Our intuitive interface simplifies navigation,
reducing the learning curve for implementation.
* Seamless Dissemination: Easily distribute computed results for inclusion in
PRIIPs KIDs and/or MiFID II (EMT) production, enhancing efficiency.
* Transparency and Reporting: Access historical cost data for comprehensive
analysis and reporting, promoting cost transparency.
* Cost Savings: Automate transaction cost calculations to reduce internal time
and effort, ultimately lowering operational costs.
* Effortless Integration: Efficiently integrates with our comprehensive suite
of fund solutions, including KIDs, EMT, and EPT.
Kunal Grover, Head of Business Development at Zeidler Group, commented:
“At Zeidler Group, we are committed to empowering our clients to scale their
fund operations for the future. Whether you are a small or large asset
management firm, our calculations engine is scalable to meet your requirements.
Our latest enhancements increase efficiency and better serve our clients.”
Arne Zeidler, CEO and Founder at Zeidler Group, added:
“Our enhanced transaction cost calculation solution is a game-changer for asset
managers. The latest enhancement and automation of our transaction cost
calculation services further solidifies Zeidler Group’s position as a digitally
innovative and progressive fund solutions provider. This innovation is a
testament to the hard work of our software engineering and of course, our
Reporting Services Division.”
ABOUT ZEIDLER GROUP
Zeidler Group is a technology-driven law firm revolutionising legal, regulatory,
compliance, and reporting services for the asset management industry. Zeidler
Group builds collaborative, strategic, and meaningful partnerships by providing
innovative digital solutions and bespoke research-based legal advice and
regulatory guidance. Zeidler Group’s range of asset management clients includes
some of the largest and most respected names in the industry and boutique
operators. The firm services more than 250 clients with aggregate assets under
management above USD 1.5 trillion.
For more information, visit: zeidler.group.
Podcast
SWISS REPRESENTATIVE INSIGHTS: EXPANDING FOREIGN INVESTMENT IN SWITZERLAND FOR
GLOBAL FUNDS
22
November
2023
In this episode of the Legal Zeidgeist podcast, the focus is on Swiss
Representative Services for foreign collective investment schemes. Kate Horgan,
Business Development Manager is joined by Josef El Semari and Michael Meier
Directors at Zeidler Group as they delve deep into the intricacies of the Swiss
regulatory landscape.
Josef and Michael unveil the intricacies of Swiss Representative services,
peeling back the layers to reveal how these professionals navigate the
ever-evolving regulatory terrain. Sharing their expertise as they intricately
map out the strategies employed by Swiss Reps, ensuring seamless compliance and
fostering a conducive environment for foreign collective investment schemes.
Views
CLASSIFICATION OF ICT-RELATED INCIDENTS UNDER DORA
24
October
2023
Valentin Chantereau
In this article within our DORA Series, we delve into how financial institutions
should categorize ICT-related incidents and assess their impact based on the
criteria outlined in the legislation. Companies will need to take into account
factors such as the number of affected clients, downtime resulting from the
incident, the geographical scope of the incident, data loss, the importance of
the affected services, and the economic consequences of the incident. Detailed
guidelines regarding these requirements can be found in the draft Regulatory
Technical Standards on criteria for classifying ICT-related incidents (the
“Draft RTS“), which were published as part of a broader Consultation Paper.
Understanding DORA’s ICT-related incident classification, major incident
materiality thresholds, and significant cyber threats:
ARE YOU AFFECTED?
In accordance with the proportionality principle established by DORA, the
classification criteria and materiality thresholds are designed to be
proportionate to the size, overall risk profile, and the nature, scale, and
complexity of services provided by all financial institutions. Consequently,
these criteria and thresholds are uniform across financial entities, regardless
of their size and risk profile, to ensure that smaller institutions are not
burdened with excessive reporting requirements.
However, in certain instances where an incident affects a substantial number of
clients and transactions without surpassing the relative thresholds, these
incidents should still be reported using absolute thresholds. This approach is
primarily intended for larger financial institutions.
WHAT ARE YOUR RESPONSIBILITIES?
Financial entities must categorize ICT-related incidents and evaluate their
impact based on the following criteria:
* The number and relevance of affected clients or financial counterparts, along
with the number or amount of transactions influenced by the ICT-related
incident.
* The extent of reputational damage caused by the ICT-related incident.
* The duration of the incident and the resulting service downtime.
* The geographic extent of the areas affected, especially if it spans more than
two Member States.
* Data losses incurred, including impacts on data availability, authenticity,
integrity, or confidentiality.
* The significance of the affected services, including financial entity
transactions and operations.
* The economic ramifications of the ICT-related incident in both absolute and
relative terms, including direct and indirect costs and losses.
CONCLUSION
DORA is more than a set of regulations; it stands as a cornerstone for ensuring
the future resilience of the financial sector. Embracing these standards and
maintaining constant vigilance is not just a means for financial institutions to
shield themselves but also a way to actively participate in the collective
pursuit of a secure and robust digital financial ecosystem. As DORA continues to
mold the financial landscape, it is imperative to stay informed and proactive.
We strongly recommend initiating internal project work without delay to ensure
timely compliance and fortify the foundation of financial resilience.
HOW ZEIDLER GROUP CAN HELP
If you have any questions or require support, the Zeidler team is here to help.
Get in touch with our team of legal and regulatory professionals to remain up to
date on the latest legal, regulatory, ESG, and compliance changes affecting the
asset management industry.
Views
UNLOCKING THE POWER OF AI: CRAFTING A RESPONSIBLE USAGE POLICY
18
October
2023
Alex Mercer
INTRODUCTION:
One of the most exciting recent developments in technology has been the
proliferation and adoption of AI technology, specifically commercially available
large language models (LLMs) like ChatGPT, LLAMA 2, and Claude. These LLMs have
had a massive impact across industries as wide-ranging as healthcare to fashion,
disrupting existing companies and fostering widespread innovation across all
levels of technical competence. While these tools have certainly proven to be
impressive, they are not infallible, and using them does not come without
potential risks.
THE IMPORTANCE OF RESPONSIBLE AI USE:
Having no safeguards or rules in place can mean that critical internal data
could be inadvertently disclosed to a third party, or that you are at risk of
erroneous output impacting a process. On the other hand, completely banning the
technology can leave you at a competitive disadvantage with lower productivity
due to not taking advantage of technological growth. As such, we would recommend
having a responsible AI use policy to ensure proper use and maximize the total
benefit your organization can receive from the technology.
WHAT SHOULD A GOOD POLICY INCLUDE?
DOWNLOAD A CHECKLIST OVERVIEW HERE.
TAILORING TO YOUR ORGANIZATION:
A good responsible use policy should first and foremost be tailored to your
organization and industry. A great starting point is to look at other
implemented policies, such as those regarding the use of software or third-party
vendors, and consider the specific requirements that would also be applicable to
LLM-based tools. Depending on the method of access, such as a website or through
an API, you might have multiple existing policies that would govern the
implementation of LLM-based tools. While pre-existing policies might not cover
the exact use case of LLM-based tools in your organization, they can provide a
great starting point for further refinement.
UNDERSTAND AND DEFINE THE SCOPE:
Clearly understand both the scope of who will use LLM-powered tools, as well as
which specific tools they will use. Will everyone at your organization be able
to use LLMs as part of their daily workload, or will it be restricted to certain
teams or job functions? Who should authorize the use of specific LLM-powered
tools, and will there be oversight in the process? Will you allow employees to
access the tool through a web browser, or would you require access through an
internal tool powered by an API? Some specialized tools, like GitHub Copilot,
may be available company-wide, but the practical implementation of the tool may
only be for engineering. It’s important to clearly understand the scope of the
tools you would like to implement to tailor an effective policy.
DATA PROTECTION:
You’ll also want to make sure that there are limits around what information can
be provided to the tools. You likely do not want employees to provide either
sensitive personal information or critical business knowledge into a tool that
will then use that information for training purposes. Depending on the tool you
are using, there can be options that keep your data private and separate from a
training set, such as using an enterprise edition or direct API access.
Depending on the vendor, data privacy and control can vary greatly, so reviewing
the individual vendor’s policy and any potential contracts is critical.
Remember, if you are not paying for a product, your data is the product.
OUTPUT CONTROLS:
You’ll also want to consider what controls will be in place surrounding the use
of the outputs from the LLM-based tools. In some cases, establishing a
human-in-the-loop policy can be incredibly beneficial. This means that before
the output from an LLM-based tool is allowed to be integrated into information
provided to external or internal stakeholders, an individual reviews the output
for accuracy and applicability with the asked question. In other cases, clear
disclaimer language might be added to the output, so the end user knows the
results were provided by the tool. It is also likely that depending on the
specific implementation of LLM-based tools in your organization, multiple output
controls will be used. As a rule of thumb, the more critical a process is, the
more important controls around integrating the use of LLM tools become.
ONGOING REVIEWS:
Finally, be sure to revisit the policy as time and technology progress. We’ve
seen an impressive growth in the LLM field, with multiple competitors and
products offering services for varying purposes and niches. Every day there are
new developments that both provide increasing opportunities, as well as
increasing potential exposure to new issues. While it is important to set
reasonable standards around use, treating the policy as a living document will
allow you to maximize opportunities and reduce risk from emerging LLM tools.
CONCLUSION AND NEXT STEPS:
The use of LLM tools doesn’t come without its complexities. There can be many
factors to consider in implementing an effective policy that enables the safe
use of these emerging technologies. It is important to tailor an effective
policy that considers your organization’s specific situation and usage of the
tools. With the right approach and proper guardrails put in place, LLM tools can
serve as a substantial value-add to your organization.
Implementing effective AI technology policies is crucial in harnessing the full
potential of these emerging technologies while managing associated risks. Craft
a tailored policy that aligns with your organization's unique needs and
technology usage. With the right strategy and safeguards in place, AI tools can
significantly benefit your organization. Reach out to Zeidler Group today for
expert guidance in drafting a custom policy that suits your requirements.
News
CONGRATULATIONS TO OUR US ASSOCIATE FOR PASSING THE UNIFORM BAR EXAM
17
October
2023
Zeidler Group is delighted to announce the outstanding achievement of our US
associate Madeline Gegg in passing the Arizona Bar Exam.We wish the warmest
congratulations to Madeline on this remarkable milestone in her career.
Views
UNDERSTANDING DORA INFORMATION REGISTER: STRENGTHENING FINANCIAL SECTOR DIGITAL
RESILIENCE
29
September
2023
Serena Goldberg
THE DORA INFORMATION REGISTER
The financial sector’s rapid digitalization requires strong regulatory measures
to safeguard against cybersecurity threats and potential technological
disruptions. Part of this effort is the Digital Operational Resilience Act
(DORA) which among others addresses the financial sector’s growing reliance on
information and communication technology (“ICT”) third-party providers.
The information register forms part of the ICT third-party risk management
framework and shall allow the financial entities to identify and assess the
risks in respect to contractual arrangements on the use of ICT services.
Separately, by the new reporting obligation of financial entities to the
national competent authorities, effective supervision and a broader
understanding of the ICT dependencies of financial entities shall be ensured.
UNDERSTANDING DORA’S INFORMATION REGISTER REQUIREMENTS
Within the ICT risk management framework, financial entities are obliged to
maintain a comprehensive register that captures all contractual arrangements
with third-party ICT service providers and on the use of ICT services. The
financial entities must distinguish between ICT services that support
critical/important functions.
Firms shall report to the national competent authority on the number of new
arrangements on the use of ICT services, the categories of ICT service
providers, the type of contractual arrangements and the ICT services and
functions which are being provided at least on a yearly basis and are obliged to
provide the entire register upon request.
This high-level requirement is specified by the Consultation Paper On Draft
Implementing Technical Standards (“ITS Draft”) that has been published by the
European Supervisory Authorities (“ESAs”). This ITS Draft present the templates
composing the information register in relation to all contractual arrangements
on the use of ICT services provided by ICT third-party service providers. The
ESAs expect to submit these draft technical standards to the European Commission
by 17 January 2024.
Financial entities are expected to use these standardized templates and to fill
in the information as laid out in the Draft ITS as part of the ICT risk
framework.
ARE YOU IN SCOPE?
The requirement targets a broad range of financial entities, among others
investment firms, managers of alternative investment funds, management companies
credit institutions, and payment institutions.
Please note that in the case of groups, all financial entities that are part of
the group shall maintain and update, in addition to their register at the entity
level, the information register at the sub-consolidated and consolidated level.
Also, group-internal service providers are in scope and the data about this
intra-group ICT arrangement must be included in the information register.
With regard to the application outside of the European Union, DORA has an
extraterritoriality effect for non-EU companies that provide ICT services in the
supply chain. This might become relevant, for example, if ICT services are
performed by an intra-group entity, which is based outside of the EU, but
provides the service to an EU-based financial entity.
Besides, it is expected that a clarification will be provided if non-EU AIFMs
that manage EU AIFs or market AIFs in the EU will fall under the scope of DORA.
WHAT ARE YOUR OBLIGATIONS?
You will be required to fill out the templates with data using the formats set
out in Annex I of the ITS Draft for the information at the entity level, and
Annex II of the ITS Draft for information at the sub-consolidated and
consolidated level.
The register of information at the entity level is composed of 10 templates. The
ESAs visualized the templates by the following illustration in the ITS Draft:
The ITS Draft provides additional and extensive details about the information
and granular instructions on how to fill out the templates.
Some of the templates are linked to each other by using four relational keys,
namely:
* The contract reference number;
* The ICT third-party service provider identifier;
* The function identifier;
* The ICT service identifier.
They are symbolized by the colored dots in the illustration above.
If you are part of a group, you must fill out all of the following templates:
In summary, you are obliged to include information about your own financial
entity, the contractual arrangements with an ICT third-party service provider,
and in principle also about the entities in the supply chain, identify the
functions and ICT services, the assessment of the ICT services and a set of
internal definitions. On a group level, you must fill out additional templates,
include information about group-internal or -external relations, specify which
group entity signs the contractual arrangement, and include clarification on the
entities that are covered by the (sub-)consolidation.
Furthermore, you are obliged to report to the competent authority on the number
of new arrangements on the use of ICT services, the categories of ICT
third-party service providers, the type of contractual arrangements, and the ICT
services and functions that are being provided at least on a yearly basis. Upon
request, you must make available the entire information register to the
regulator.
WHAT SHOULD YOU DO NOW?
We recommend that you read through the detailed instructions of the ITS Draft in
order to familiarise yourself with the new regulatory requirements.
Most important will be the review exercise of the existent database and the
identification of missing but required data under DORA. The accurate and
consistent data is the basis for a compliant information register and any
reporting obligation.
Your data management capabilities, operational processes regarding the data
collection from various parties, and technical setup of the information register
including the reporting functionality to the national competent authorities are
crucial to meet the new regulatory requirements.
In addition, you must ensure that all the data is properly stored and archived
for 5 years after the contract termination with the ICT service provider.
Furthermore, you should ensure that the information register has an audit trail
functionality that allows to retrieve changes that significantly affects the
information contained in the register of information for at least the previous 5
years.
CONCLUSION
The DORA requirement for an information register shall strengthen the digital
resilience of the financial sector. For the implementation of the new measures,
enormous efforts are expected to be undertaken by the financial entities.
Despite the draft character of the ITS and the ongoing consultation, significant
and materially new requirements are likely to arise.
Given the complexity, the amount of data, and the impact on the operational
processes, we recommend starting with the internal project work as soon as
possible.
HOW ZEIDLER GROUP CAN HELP
If you have any questions or require support, the Zeidler team is here to help.
Get in touch with our team of legal and regulatory professionals to remain up to
date on the latest legal, regulatory, ESG, and compliance changes affecting the
asset management industry.
Views
ESG-RELATED REGULATIONS: UPDATE ON THE US SEC FUND NAME RULE
22
September
2023
Elisa Forletta-Fehrenberg
Madeline Gegg
Note to US Citizens: Please note that this article is not intended to constitute
legal advice to any citizen or resident of the United States of America.
This past spring, we discussed the SEC’s proposed rules regarding ESG-Related
Regulations, including amendments to the SEC’s Fund Name Rule. To recap, the
proposal broadened the applicability of the 80% investment policy mandate. This
mandate stipulates that a fund must invest a minimum of 80% of its assets in
accordance with terms mentioned in the fund's name. The proposal extends this
requirement to include any terms in a fund's name that pertain to ESG
(Environmental, Social, and Governance) factors.
On 20 September 2023, the SEC announced in a Press Release that they have
adopted the amendments to the Fund Name Rule (section 35d-1 of the Investment
Company Act of 1940). The existing Fund Name Rule aims to prevent fund names
from misleading investors about the fund’s investment policies and any potential
risks the policies may expose investors to. If a fund name suggests a focus in a
particular type of investment, it is required to adopt a policy aligning at
least 80% of the fund’s assets in those investments. The final rule release
reveals that the SEC contemplated a disclosure-based framework instead of the
80% investment policy, however, ultimately concluded that the 80% investment
policy method was best for addressing concerns of misleading investors. The SEC
attributes this decision, in part, to the fact that a fund’s name is the first
information investors receive regarding the fund and has been found to have an
impact on investors’ decisions to invest in a fund.
HOW TO COMPLY?
The amendments do not state exactly which additional wording or phrases will
bring a fund’s name under the scope of the amendments, however, the primary
types of names that the amendment is anticipated to cover, include fund names
such as “growth” or “value” or terms that have a thematic or ESG focus according
to the SEC factsheet released with the final rule. Terms in fund names will need
to be defined in fund prospectuses along with an explanation of criteria used
for selecting investments associated with those terms. Terms in fund names must
also be consistent with plain English meanings.
The amendments require that funds follow the 80% investment policy during normal
circumstances. Where a fund identifies that their portfolio is inconsistent with
the 80% investment policy, the fund is obligated to return to compliance as soon
as is reasonably practicable, which shall be no later than 90 days after
identifying that the portfolio is not in compliance. Funds will be required to
assess their portfolio assets’ inclusion in the fund’s 80% basket at least
quarterly.
The amendments also include new recordkeeping requirements. Funds that are newly
required to adopt an 80% investment policy will need to maintain a written
record documenting its compliance with the rule, including the fund’s record of
which assets are invested in the fund’s 80% basket. This recordkeeping
requirement will be filed on the fund’s Form N-PORT filing. According to the
final rule, a fund will also be required to keep records of any notice the fund
sends to its shareholders pursuant to the rule. Funds that are not required to
adopt an 80% investment policy do not have any obligations under these
additional recordkeeping requirements.
NEXT STEPS
Certain funds, such as closed-end funds and business development companies
(BDCs), will potentially need shareholder approval before changing their 80%
investment policy pursuant to the rule amendments.
The Fund Name Rule amendments will become effective sixty (60) days after
publication in the US Federal Register.
Funds will have 24 or 30 months to comply with the amendment from its effective
date, depending on the size of the fund:
* Fund groups with net assets of $1 billion or more will have 24 months to
comply with the amendments;
* Fund groups with net assets of less than $1 billion will have 30 months to
comply.
Please note that one point remains open for discussion in relation to the ESG
“integration funds” as the SEC is not adopting the proposed approach to
integration fund names. In this regard, the SEC stated that it is still
reviewing public comments and that it remains under consideration.
If you have any questions or require support, reach out to our global team and
stay up to date on the latest regulatory compliance changes affecting the asset
management industry.
Views
SEC’S NEW RULES FOR PRIVATE FUND ADVISERS: ENHANCING OVERSIGHT IN THE US
5
September
2023
Madeline Gegg
Alex Mercer
OVERVIEW OF THE SEC’S REGULATORY CHANGES FOR PRIVATE FUND ADVISERS
In order to improve oversight for the Private Fund market in the US, the SEC has
recently adopted new rules aimed to enhance the regulation of Private Fund
Advisers.
The SEC purports that the enhanced rules will help promote greater competition
and thereby efficiency in the private fund market. Unless specified otherwise,
the rules discussed in this post apply to Registered Private Fund Advisers in
the US. Since the enactment of the Dodd-Frank Act in 2010, the SEC’s oversight
in the private fund industry has steadily increased. The new rules demonstrate
the SEC’s continuing intention to increase oversight and disclosure across the
financial services industry.
KEY COMPONENTS OF THE SEC’S NEW RULES
The SEC’s new rules for Private Fund Advisers can be summarized into six
distinct parts:
* Quarterly Statement Rule
* Private Fund Audit Rule
* Adviser-Led Secondaries Rule
* Restricted Activities Rule
* Preferential Treatment Rule
* Compliance Rule Amendments
QUARTERLY STATEMENT RULE: TRANSPARENCY IN FUND REPORTING
The Quarterly Statement Rule will require private fund advisers to provide
quarterly disclosure statements to investors including key information regarding
fund fees, expenses, and performance.
PRIVATE FUND AUDIT RULE: ANNUAL FINANCIAL AUDITS FOR TRANSPARENCY
The Private Fund Audit Rule will also require private fund advisers that are
registered with the SEC to provide investors with annual financial statement
audits of each private fund that the adviser advises.
ADVISER-LED SECONDARIES RULE: ENSURING FAIRNESS AND DISCLOSURE
The Adviser-Led Secondaries Rule requires that all registered private fund
advisers to obtain a fairness opinion or a valuation opinion from an independent
third party when offering existing investors the option between selling their
interests or converting their current interests into shares of another
investment vehicle that is managed by the private fund adviser. Additionally,
this rule requires the private fund adviser to disclose any relationship the
adviser has had, if any, within the last two years with the independent third
party.
To reiterate, the theme of the new rules is disclosure, disclosure, disclosure.
RESTRICTED ACTIVITIES RULE: PROHIBITING CERTAIN PRACTICES
The Restricted Activities Rule provides that certain activities will be
prohibited unless the private fund adviser discloses the activities to their
current investors. These activities include charging certain fees or expenses of
the adviser to the investors, reducing the amount of adviser claw back, charging
or allocating fees or expenses related to an investment on a non-pro rata basis,
or borrowing or receiving an extension of credit from a private fund client. The
conflict of interest that may interfere with investors’ interests is a key
concern for private funds the SEC aims to address.
PREFERENTIAL TREATMENT RULE: ADDRESSING INVESTOR FAIRNESS
Another key component of the new rules is a prohibition against private fund
advisers providing certain types of preferential treatment that have a material
negative impact on other investors, as well as prohibiting any preferential
treatments without disclosing the treatment to other current and prospective
investors. In part, the Preferential Treatment Rule requires certain
preferential information about portfolio holdings or exposures to be offered to
all investors, otherwise it is prohibited.
COMPLIANCE RULE AMENDMENTS: STRENGTHENING COMPLIANCE POLICIES
In addition, there are Compliance Rule Amendments being implemented across all
registered advisers under the Advisers Act. The reforms require all registered
advisers to document in writing the required annual review of their compliance
policies and procedures. This is intended to help the SEC with reviewing
compliance with SEC rules and identify potential industry weaknesses.
ENFORCEMENT TIMELINE: IMPLEMENTATION OF NEW RULES
As planned, compliance with most of the new rules will be enforced on a rolling
basis, depending on the type and size of the fund, from 23 August 2023, when the
finalized rule was published on the federal registrar. The Compliance Rule
Amendments takes effect in 60 days after the publication on the federal
registrar.
WHAT’S NEXT: ANTICIPATED LITIGATION AND IMPACT ON COMPLIANCE
In short, likely a lot of litigation. Multiple private fund industry
associations collectively filed suit against the SEC on 01 September 2023 in the
Fifth Circuit on behalf of the interests of private fund advisers and associated
parties. The complaint alleges that the new rules “exceed the Commission’s
statutory authority,” and are arbitrary, capricious, an abuse of discretion, and
contrary to law. Furthermore, the complaint alleges that compliance with the
rules would interfere with existing contractual terms between investors and
their private fund advisers.
While not the first of its kind, the lawsuit comes within the first few weeks
after the SEC published its new rules to the federal registrar. As far as moving
forward with the new rules in mind, their applicability and compliance
requirements may be delayed while the matter is litigated, though, at such early
stages of the process, it may be too soon to tell. The enforcement of the new
private fund adviser rules will certainly be a space to watch moving forward.
STAY INFORMED: FUTURE DEVELOPMENTS IN PRIVATE FUND ADVISER REGULATIONS
If you have any questions or require support, reach out to our global team and
stay up to date on the latest regulatory compliance changes affecting the asset
management industry.
News
ZEIDLER GROUP ENHANCES ITS SUITE OF FUND SERVICES WITH SWISS REPRESENTATIVE
SERVICE
10
August
2023
Winterthur, 10 August 2023- Zeidler Group, the technology-driven law firm, and
regulatory compliance provider revolutionizing the legal and compliance services
for the asset management industry, today unveiled its latest fund solution,
Swiss Representative Service.
As a FINMA-licensed and regulated Swiss Representative, Zeidler Group is now
authorized to represent foreign funds for offering to qualified and
non-qualified investors in Switzerland.
Zeidler Group is renowned for its use of tech-driven automated workflows and
commitment to efficiency and scalability. The law firm’s new Swiss
Representative service is resolute in delivering unmatched value and expert
legal delivery to ensure robust compliance and ongoing fund governance with
Swiss laws and regulations as well as EU, UK and 70+ jurisdictions for global
coverage.
Josef El Semari, Director, at Zeidler Group said:
“As the demand for our services grows, we are thrilled to expand our regulatory
division offerings with our newest service. Asset managers seek streamlined
processes, and we empower our clients by offering a full suite of fund services.
Obtaining the FINMA license enables us to provide our clients and the wider
asset management more flexibility to consolidate all their Swiss requirements
under Zeidler Group to achieve great efficiencies.”
Zeidler Group’s Swiss Representative Service stands out in a saturated market of
service providers due to its dynamic suite of fund services. The firm
facilitates seamless entry into the Swiss market, connecting foreign funds,
Swiss investors, and the Swiss financial regulator FINMA.
Based in Winterthur, the highly specialized Swiss Representative team not only
ensures legal compliance and administrative tasks but also meticulous fund
registration and fund setup in line with the Swiss Collective Investment Schemes
Act (CISA), positioning funds for success in Switzerland and beyond.
Arne Zeidler, CEO and Founder of Zeidler Group, emphasized the company’s
strategic expansion:
“Embracing our proven reputation as a trusted EU Facilities Agent Provider and
UK facilities provider, we are proud to introduce this latest addition to our
arsenal of fund services. This strategic move not only meets but surpasses our
clients’ long-standing demands, bridging a crucial gap in our offerings. With
our latest service expansion, we are thrilled to cover the entire European
continent, solidifying our position as a dynamic and forward-thinking industry
leader.”
Jasminka Makovec, Head of Regulatory Services Division of Zeidler
Group highlighted the firm’s client-centric approach, stating:
“We are unwavering when it comes to delivering a truly end-to-end service that
empowers our clients to meet their regulatory and compliance requirements
worldwide. Zeidler Group is achieving economies of scale that are appreciated by
our clients by offering solutions for cross-border distribution in-house. We
believe this approach is beneficial not only for our clients but also for the
end investors.”
To learn more about the Swiss Representative Service, please contact
SwissRep@Zeidlerlegalservices.com
About Zeidler Group
Zeidler Group is a technology-driven law firm and compliance provider
revolutionizing legal, regulatory, and compliance services for the asset
management industry. Through innovative digital solutions and research-based
legal advice, Zeidler Group establishes collaborative partnerships and serves a
diverse range of asset management clients, including industry leaders and
boutique operators. The firm’s services extend to over 200 clients with
aggregate assets under management exceeding USD 1 trillion.
For more information, please visit zeidler.group.
Views
ESG-RELATED REGULATIONS ON THE HORIZON: WHAT THE SEC HAS IN STORE
26
April
2023
Elisa Forletta-Fehrenberg
Madeline Gegg
*ZEIDLER GROUP US DOES NOT OFFER LEGAL ADVICE.
INTRODUCTION
In recent years, Environmental, Social, and Governance (“ESG”) factors have
become a focus point for investors and advisers alike when considering
investment strategies. In addition to the standards adopted by the EU, such as
the ‘Sustainable Finance Disclosure Regulation’ (“SFDR”), the US Securities and
Exchange Commission (“SEC”) has proposed rules addressing ESG approaches to
prevent greenwashing and requiring transparency for US actors as well.
Whilst SFDR requires different levels of disclosure depending on the ESG
integration adopted, one of the rules proposed by the SEC actually
differentiates between three types of funds, thereby formally introducing a
“labelling regime”.
PROPOSED RULES
The SEC has published three proposals: the first is a proposal for
climate-related disclosure rules for Public Companies; the second is a proposal
for ESG disclosure rules for Investment Companies and Advisers; the third is an
amendment to the existing Name Rule to address misleading investment company
names.
The Proposal for Climate-Related Disclosure Rules for Public Companies (the
“Climate Risk Disclosure Proposal”)
The first set of rules requires public companies registered with the SEC to
disclose “information about a registrant’s climate-related risks that are
reasonably likely to have a material impact on its business, results of
operations, or financial condition,”. The rules within this Climate Risk
Disclosure Proposal would require disclosures to be made in periodic SEC reports
and registration statements. The Climate Risk Disclosure Proposal requires
qualitative – description of risks, impacts and opportunities – and quantitative
climate-related disclosures. The quantitative metrics must be provided in
accordance with XBRL and will need to be in part attested by an independent
attestation service provider. These disclosures will need to be included in the
publicly traded companies annual reports and, if applicable, reports throughout
the year.
These rules are based on recommendations from the Task Force on Climate-Related
Financial Disclosures (“TCFD”) as well as the Greenhouse Gas Protocol and are in
the final state before enforcement, coming into force under a phased-in approach
at the earliest by 2024.
THE PROPOSED ESG CATEGORIZATIONS
The SEC is proposing three categories of funds to reflect differences of
sustainability related objectives. Funds will only fall into the different
categories if they consider any ESG factors at all.
i. Integrated Funds
Integrated funds are funds which integrate both ESG and non-ESG factors in
investment decisions. The disclosure requirement for Integrated Funds is to
explain to investors how ESG factors are included in their strategy in the
prospectus. The proposed rules include amendments to the registration and
periodic reporting forms themselves, as such the required disclosures must be
included in the relevant forms. For example, integrated funds would need to
include disclosures on the funds’ annual and periodic reports.
ii. ESG-Focused Funds
ESG-focused funds are funds which use ESG factors “as a significant or main
consideration” in investment selection or engagement. These disclosures require
information about the fund’s strategy, including:
• a table demonstrating ESG-related investment strategy;
• the procedure for proxy voting or engagement with issuers as part of ESG
strategy;
• the portfolio’s carbon footprint;
• the fund’s use of exclusionary screening methods if applicable; and
• how the fund considers GHG emissions.
This type of funds also includes those whose name indicates the incorporation of
ESG factors in the investment decision making.
iii. Impact Funds
Impact funds are a subset of ESG-focused funds mentioned above. The disclosure
requirements for Impact funds are the same as those for ESG-focused funds with
the addition of qualitative and quantitative measures assessing the progress
made in achieving the specific ESG impact.
These rules also affect advisers who will be required to provide specific
disclosures in relation to their approach to ESG investing in the Adviser
Brochures.
THE PROPOSED AMENDMENTS TO THE FUND NAME RULE
These proposed rules seek to amend the Name Rule, which regulates the labelling
of investment products under the Investment Company Act of 1940 to prevent
misleading investors. The proposal would require funds to disclose additional
information about their ESG investments and strategies, which includes
information on the criteria used to select ESG investments, the extent to which
the investments align with their ESG goals, and the methods used to evaluate the
ESG performance of the investments. The proposed rules amend the scope of the
80% investment policy requirement, by extending this to funds whose names
indicate particular characteristics being considered in the investment decision.
These funds will be required to invest at least 80% of their assets (incl.
derivatives calculated by using the notional amount rather than market value) in
alignment with the ESG objective, whilst allowing potential drifts to be
rectified withing 30 days. This includes references to “ESG”. In addition,
affected funds will be required to disclose in the prospectus how they define
the terms used in the name as well as the criteria described by the name that
are used to select investments.
These rules also mean that ESG-related terms cannot be used in the name of funds
which consider ESG factors along with, but not more significantly than, other
factors (e.g. integration funds).
Other procedural amendments are also included in the proposed rules.
The proposed amendments are expected to be finalized by October 2023.
Views
ELTIF 2.0: THE NEXT GENERATION OF LONG-TERM INVESTMENT OPPORTUNITIES
12
April
2023
Valentin Chantereau
Patricia Nitschke
*This is an article from Zeidler Group's International site. Zeidler Group US
does not offer legal advice.
Introduction
The European Long-Term Investment Fund (“ELTIF”) has been around since 2015 and
was created to provide investors with an opportunity to invest in long-term
projects that support economic growth and job creation. However, despite its
potential benefits, the uptake of ELTIF has been slow due to several regulatory
and operational challenges.
On 20 March 2023, the European Long-Term Investment Funds Regulation (EU)
2023/606 (“ELTIF 2.0”), amending Regulation (EU) 2015/760 (the “ELTIF
Regulation”), was published in the Official Journal of the European Union. ELTIF
2.0 aims to be a new and improved version of this fund type that aims to address
these issues and unlock the full potential of long-term investments.
ELTIF 2.0 was entered into force on April 9th, 2023, and the amendments to the
ELTIF Regulation will apply from January 10th, 2024.
ELTIF 2.0 addresses several supply and demand constraints and clarifies the
scope of eligible assets and investments, portfolio composition and
diversification requirements, cash borrowing and lending conditions and other
fund rules, including sustainability considerations. The changes create
improvements aimed at increasing investor protection and facilitating the
creation of a more diversified and transparent market. The main aim of ELTIF 2.0
is to increase participation by retail investors, for example through private
equity, which is traditionally the sphere of wealthy investors and institutions.
Background
The ELTIF Regulation was first introduced in April 2015. The focus of the ELTIF
Regulation was to facilitate to raise European long-term investments for certain
types of assets together with the framework of a passporting regime, similar to
the AIFMD and UCITS passporting regime.
ELTIFs invest on a long-term basis in infrastructure projects, real estate and
SMEs, among others. The aim of the ELTIF Regulation was to support the
development of ELTIFs as an alternative long-term investment vehicle for
institutional and retail investors and to encourage long-term investments
towards European long-term investments in the EU’s ‘real economy’.1. Despite the
aims to promote European long-term investments, since the introduction of the
ELTIF Regulation in 2015, only a relatively small number of ELTIFs have been
authorised.2 The aggregate size of net assets of those funds was estimated at
only approximately EUR 2.4 billion in 2021 compared to the total net assets of
European investment funds (UCITS and AIFs) of EUR 19.6 trillion.3
Key changes
1. Increased Investor Protection
In order to enhance the level of trust especially for retail investors, ELTIF
2.0 places a greater emphasis on investor protection by introducing more
stringent due diligence requirements and a requirement for greater transparency
in the investment process. This will help reducing the risk of investors being
exposed to unsuitable or fraudulent investments.
2. Simplification of the Suitability Test
To simplify the administration for ELTIF managers, the ELTIF specific
suitability test requirement was deleted. It is now required to carry out an
assessment of suitability and provide potential retail investors with such in
accordance with Article 25(2) and (6) of Directive 2014/65/EU (“MiFID II”).
3. Ease of Requirements for Marketing to Retail Investors
ELTIF 2.0 introduces a harmonised distribution regime for retail investors by
way of removing the EUR 10,000 initial minimum investment requirement and the
10 % limit on aggregate investment cap on financial instrument portfolios not
exceeding EUR 500,000 for retail investors.
In addition, the requirement of the local facilities was removed alongside other
complementary amendments.4 This complements the efficient and effective use of
the passport for the retail-distribution passport.
4. Encouraging Long-term Investments
ELTIF 2.0 aims to encourage long-term investments by increasing the maximum
investment period from ten to fifteen years. This will provide more time for
investments to mature and generate returns, thereby making the ELTIF more
attractive to institutional and retail investors.
5. ELTIF Manager Authorisation
ELTIF 2.0 does no longer require that the ELTIF Manager to have an additional
ELTIF management authorisation. ELTIF 2.0 amends Article 5 of the ELTIF
Regulation to provide that only the ELTIF itself is subject to regulatory
authorisation.
6. Enhanced Market Liquidity and Redemption Rights
ELTIF 2.0 aims to increase the liquidity of the long-term investment market by
allowing ELTIF managers to invest in listed securities and facilitating the
trading of ELTIF units on the secondary market. This will make it easier for
investors to buy and sell their units and increase the attractiveness of the
ELTIF as an investment vehicle.
While the ELTIF remains a closed-ended product by nature, ELTIF 2.0 introduces
redemption rights during the lifetime of the fund under certain specific
circumstances, including where appropriate redemption policies and liquidity
management tools are compatible with the relevant ELTIF’s long-term investment
strategy.5
7. Amendments to Eligible Assets and Portfolio Diversification
ELTIF 2.0 allows for a broader range of assets to be included in the ELTIF
portfolio, including renewable energy, infrastructure, and real estate. It also
removes the minimum threshold for individual value of real estate assets. This
will provide investors with a wider range of investment opportunities, thereby
increasing the diversification of the market.
The amended thresholds in portfolio composition and diversification include the
reduction of the diversification requirements by way of lowering the minimum
investment in eligible investment assets from 70% to 55%.
ELTIF 2.0 permits fund of fund strategies and removes the 20% investment limit.
It also expands the scope of eligible collective investment undertakings to
include ELTIFs, EuVECAs and EuSEFs and UCITS and EU AIFs managed by EU AIFMs
(with setting a concentration of limits of no more than 30% of the units or
shares of a single ELTIF, EuVECA, EuSEF, UCITS or EU AIF) as eligible
investments.
The investment rules are further amended with regard to master-feeder ELTIFs
structures by permitting that one ELTIF may invests at least 85% of its assets
into another ELTIF.
ELTIF 2.0 distinguishes between ELTIFs marketing to professional investors and
ELTIFs marketing to retail investors. It is noteworthy that ELTIFs marketing
solely to professional investors will be able to take advantage of the revised
leverage limit, increased from 30% to 100% of such ELTIF’s net asset value.
In addition, ELTIF 2.0 increases borrowing limits (exceeding short-term
borrowing) from 30% to 50% of the net asset value of the ELTIF, when marketing
to retail investors, and 100% of the net asset value of the ELTIF, if marketing
only to professional investors.
Impact for existing ELTIFs
Existing ELTIFs or those established between 9 April 2023 and 10 January 2024
can choose to opt-in to ELTIF 2.0, subject to notification of the competent
authority of the ELTIF, such as the CSSF in Luxembourg or the CBI in Ireland.
This creates an opportunity for structures that do not yet exist or are not yet
authorized as ELTIFs prior to 10 January 2024 to take advantage of the ELTIF 2.0
regime from their establishment/authorization date, subject to the non-objection
of the relevant regulatory authority.
ELTIFs authorized under the original regulation before 10 January 2024 are
deemed to comply with ELTIF 2.0 until 11 January 2029. After this date, they
will need to comply with ELTIF 2.0. However, if such ELTIFs do not raise
additional capital on or after 10 January 2024, they will be deemed to comply
with ELTIF 2.0 even after 11 January 2029.
Conclusion
ELTIF 2.0 represents a significant step forward in the development of a robust
and efficient long-term investment market in the European Union. By introducing
greater investor protection, a more diversified investment market, enhanced
market liquidity, and longer investment periods, ELTIF 2.0 aims to unlock the
potential of long-term investments and support economic growth. Investors and
fund managers should note these developments and consider the opportunities
presented by the new ELTIF framework.
Whitepaper
CROSS-BORDER DISTRIBUTION FRAMEWORK (CBDF) IMPLEMENTATION TRACKER
3
June
2022
Sarah Noville
Sabir Musthafa
The objective of the Cross-Border Distribution Directive and Regulation,
effective from 2 August 2021, is to improve and simplify the cross-border
distribution of investment funds within the EU. The directive and regulation
apply to both UCITS and AIFs.
Zeidler’s legal and regulatory experts have summarised the implementation
progress of the new CBDF-Directive in the relevant EU / EEA member states to
ensure firms are aware of potential operational blind spots to maintain ongoing
fund governance best practices.
Get clarity on each Member States’ implementation progress with Zeidler’s legal
and regulatory expertise.
ACCESS THE WHITEPAPER HERE
Please note this document will be updated periodically to reflect the
implementation progress in each EU / EEA member state.
The document was last updated on Friday, 3 June 2022.
News
ZEIDLER GROUP RECOGNISED AS AN AIFINTECH 100 FIRM
12
July
2022
London, 12 July 2022- Zeidler Group, the technology-driven law firm and
compliance provider revolutionising the legal and compliance services for the
asset management industry, today announced its inclusion in the AIFintech100.
The prestigious ranking highlights the world’s most innovative solution
providers developing artificial intelligence (AI) and machine learning
technologies to solve challenges or improve efficiency in financial services.
The firms chosen were selected by a panel of industry experts and analysts based
on research produced by FinTech Global on over 2,000 FinTech companies.
“Now, more than ever, established financial institutions need to be aware of the
latest AI and data analytics technology in the market to deliver competitive
financial products and reach new customers. The AIFinTech100 list helps senior
decision-makers in the industry filter through all the vendors in the market by
identifying the market-leading AI innovators which will have a lasting impact on
the industry.”
“We are delighted to be recognised and included among the world’s most
innovative companies. Using digital innovation to create efficiencies and added
value for our clients is a cornerstone value of our firm. The recognition
demonstrates the hard work and tenacity of our software engineering division as
well as the collaboration we have we our clients.”
“The recognition is a testament to our service divisions and their commitment to
client delivery. As a tech-driven law firm and compliance provider, we
continuously look to innovate and explore new ways to deliver streamlined and
futureproofed solutions for our clients and wider community. We are delighted to
be ranked again this year”.
Zeidler Group is a technology-driven law firm and compliance provider
revolutionising legal, regulatory and compliance services for the asset
management industry. Zeidler Group builds collaborative, strategic, and
meaningful partnerships through its provision of innovative digital solutions
and bespoke research-based legal advice and regulatory guidance. Zeidler Group’s
range of asset management clients includes some of the largest and most
respected names in the industry, as well as boutique operators. The law firm
services more than 200 clients with aggregate assets under management above USD
1 trillion.
News
ZEIDLER GROUP BOLSTERS GLOBAL REPORTING SERVICES PRACTICE WITH LEADING ASSET
MANAGEMENT EXPERT RÜSTEM DAGTEKIN
14
December
2022
The Zeidler Group today announced that industry leader Rüstem Dagtekin has
joined as Director – Product Owner, in the Reporting Services Division, based in
Luxembourg. Mr. Dagtekin brings deep experience managing fund data and
regulatory reporting solutions, including UCITS and PRIIPs production, costs,
and risks calculations.
Most recently, Mr. Dagtekin served as the PRIIPs and MIFID cost and charges
calculations subject matter expert at KNEIP- Deutsche Borse Group, where he was
a pioneer in developing automated solutions to efficiently report and disclose
MIFID and PRIIPs cost and charges figures. He has successfully developed and
marketed his products throughout his career and has built an extensive client
base.
“I am thrilled to join such an innovative firm as Zeidler where I can continue
to transform manual workstreams into technology-driven, automated solutions that
bolster efficiency and add value to clients,” said Mr. Dagtekin.
Zeidler’s Reporting Services Division simplifies regulatory reporting
requirements with an end-to-end intuitive dashboard built to eliminate human
error and manual processes, enabling asset managers to fulfil their regulatory
reporting requirements digitally.
“We are pleased to welcome a talented professional like Rüstem to our global
team,” said Zeidler CEO Arne Zeidler. “With his deep expertise in providing
transaction costs and ongoing charges calculations and our transformational
technology platforms, we are redefining legal value by building robust,
automated solutions for our asset management clients.”
Mr. Dagtekin earned his M.S. in Banking and Finance from the Luxembourg School
of Finance, an Executive M.S. in Corporate Finance from NYU Stern, a double M.S.
in International Finance and industrial economics from the CEFI – University of
the Mediterranean, Aix-Marseille II, and a B.S. in economics and corporate
management from Nancy II University. He speaks and writes on topics related to
quantitative analyses, model validation, risk management and is fluent in
English, and French, Kurdish, and Turkish.
Whitepaper
ESG EU REGULATORY UPDATE: IMPACT ANALYSIS
17
June
2022
Elisa Forletta-Fehrenberg
Sarah Noville
Zeidler Group's Head of ESG Services Division, Elisa Forletta-Fehrenberg and
Senior Associate, Sarah Noville have analysed and summarised the following ESG
regulatory updates:
* European Commission's Response to ESAs Q&As,
* ESA's clarification on RTS - May 2022
* ESMA Supervisory statement
Ensure you are aware fo the practical implications and key items to consider.
DOWNLOAD THE GUIDE HERE.
This impact assessment is dated 17 June 2021. Given the dynamic nature of
regulatory changes in this space, please note that the assessment results may be
subject to change.
News
CSSF — STANDARDISED MODEL PROSPECTUS FOR UCITS
19
January
2023
Tara Dutta
On 17 November 2022 the Luxembourg regulatory authority (Commission de
Surveillance du Secteur Financier- "CSSF") published a new Standardised Model
Prospectus (the "SMP") in English for undertakings of collective investment in
transferable securities ("UCITS") accompanied by a general User Guide and a
Sub-Fund Specific Guidance for the set-up of sub-fundsusing the SMP.
The SMP should serve as a guidance for the set-up of UCITS and good practice to
shorten the authorisation process by the CSSF. It composes and reflects the
current and up-to-date practice and allows users to insert compulsory
information of the UCITS in a template.
Background
An investment fund set up as a UCITS must be previously authorised by the CSSF
in order to carry out any activities in Luxembourg. Before the creation or
registration of a UCITS in Luxembourg, an application letter must be filed with
the CSSF for entry on the official list. The official list is a register of all
the investment funds authorised in Luxembourg and which are subject to the
supervision of the CSSF. The entry on the official list is tantamount to
authorisation and the CSSF will notify the entry to the investment fund
concerned.
The application letter must be accompanied by several documents including the
prospectus of the UCITS. A UCITS will only be authorised if the CSSF has
approved the respective management regulations (i.e., prospectus, Articles of
Association/Fund Rules) and the choice of the depositary. Upon receipt of the
prospectus and all compulsory documents, the CSSF will examine and if
satisfactory, processes the registration of the UCITS on the official list.
1. Scope
* a UCITS to be set up as a common fund or with multiple sub-funds of low to
average complexity domiciled in Luxembourg;
* a UCITS to be set up in the form of an investment company with variable
capital ("SICAV") domiciled in Luxembourg; and
* a UCITS to be managed by a Luxembourg-domiciled Management Company ("ManCo")
or by a Management Company domiciled in another EU Member state in accordance
with the freedom to provide services on a cross-border basis.
1. Practical implementations of using the SMP
The SMP shall effectively be used for the establishment of new UCITS and does
not have an impact on already authorised UCITS. The CSSF clarifies that the SMP
shall not be considered as a regulatory requirement or as a guarantee for the
approval and does not limit the right of the CSSF to request additional
information as it deems necessary in the context of the authorisation process.
The creation of a uniform structure shall solely simplify the review of the
content and be understood as a guide as to what and where rather than the extent
and content of the information to be provided. A review of whether the
information given meets the regulatory requirements remains
mandatory.
In practice, the authorisation process of UCITS remains unchanged and the
processing times from submission of the application to approval will depend on
the content, completeness, accuracy, complexity of the investment strategies and
the speed of response either by the Mano or the CSSF.
III. How can Zeidler Group assist?
We support you with the set-up of UCITS in Luxembourg including the drafting of
your fund's constitutional and offering documents for filing, ensuring that the
documents meet the relevant regulatory requirements and liaise with the CSSF to
obtain fund approval.
For additional queries in respect of the above, please do not hesitate to reach
out and contact a member of our Legal Services Division or Regulatory Services
Division.
News
ZEIDLER GROUP RECOGNISED AS AN AIFINTECH 100 FIRM
4
January
2023
Sarah Noville
Elisa Forletta-Fehrenberg
HERE IS SOME PLACEHOLDER CONTENT
Whitepaper
MANAGEMENT AND SUSTAINABILITY RISK: ARE YOU READY?
11
December
2022
Elisa Forletta-Fehrenberg
Katrina Crampton
Sarah Noville
INTRODUCTION
On 21 April 2021 the European Commission adopted:
* a new Delegated Directive (EU) 2021/1270 amending Directive 2010/43/EU (the
“UCITS Delegated Directive”), as regards sustainability risks and
sustainability factors for undertakings for collective investment in
transferable securities (“UCITS”); and
* a new Delegated Regulation (EU) 2021/1255 amending Delegated Regulation (EU)
No 231/2013 (the “AIFMR”), as regards sustainability risks and sustainability
factors to be taken into account by alternative investment fund managers
(“AIFMs”).
Specifically, it impacts management companies and AIFMs and how they integrate
sustainability risks in their management process.
For a definition of “sustainability risks” and other ESG-related industry terms,
please refer to our ESG Glossary.
BACKGROUND: WHAT WAS REQUIRED SO FAR?
Under Article 3 of the Regulation (EU) 2019/2088 on sustainability-related
disclosures (“SFDR”), financial market participants – in our case, management
companies and AIFMs – must publish on their website “information about their
policies on the integration of sustainability risks in their investment
decision‐making process”. In some cases, management companies and AIFMs opted
for simply disclosing that they would not integrate sustainability risks in
their investment decision-making process.
WHAT ARE THE NEW REQUIREMENTS?
The UCITS Delegated Directive and the AIFMR go one step further as management
companies and AIFMs are now required – in accordance with the proportionality
principle – to take into account sustainability risks when establishing,
implementing and maintaining their internal procedures and organisation. This is
regardless of whether these are offering sustainable funds or not. With this in
mind, there is also an obligation for management companies and AIFM to ensure
sufficient resources and expertise for effectively integrating sustainability
risks in their processes.
The responsibility for integrating sustainability risks in the firm’s activities
will lay with senior management. This means ensuring that sustainability risks
are integrated when:
* implementing the investment policy for each managed fund and overseeing the
approval of such investment strategies;
* ensuring that it has a permanent and effective compliance function;
* reviewing periodically that the general investment policy, the investment
strategies and the risk limits of each managed fund are properly and
effectively implemented and complied with;
* approving and reviewing periodically the adequacy of the internal procedures
for undertaking investment decisions for each managed fund;
* approving and reviewing periodically the risk management policy and
arrangements, processes and techniques for implementing that policy; and
* for AIFM, ensuring that valuation procedures are well designed and
implemented.
Sustainability risks should also be considered when identifying potential
conflicts of interest or when performing due diligence on investments or
implementing the risk management policy as regards the portfolio composition of
a specific fund.
Sustainability risks must now be considered alongside the traditional market,
liquidity, and counterparty risks.
WHAT DOES IT MEAN IN PRACTICE?
When implementing the new requirements under the UCITS Delegated Directive
and/or the AIFMR, you should pay particular attention to the following:
* the website disclosures under Article 3 SFDR;
* the product pre-contractual disclosures under Article 6 SFDR; and
* all relevant policies and procedures relating to:
* investment due diligence;
* risk management;
* remuneration;
* recruitments and human resources (including a sufficient panel of expertise
and regular trainings on sustainability-related matters);
* organisational structure and decision-making;
* internal reporting and recording keeping; conflict of interest;
* delegation monitoring; accounting and valuation;
* costs and fees;
* reporting; and internal control functions and regular controls by senior
management.
ENTRY INTO FORCE
For management companies, the deadline for transposition by Member States is 31
July 2022, for the measures to apply from 1 August 2022. You can follow
transposition in each Member State here.
For AIFMs, the measures will apply directly from 1 August 2022.
IN CONCLUSION
Sustainability risks have the potential to really impact funds, and as such
should be taken into account by management companies and AIFMs at several
levels, regardless of whether these are offering sustainable funds or not.
With the deadline for implementation upon us, management companies and AIFMs
should review their internal procedures and processes as well as their risk
management policies, whilst at the same time ensuring that they have sufficient
capabilities and expertise to perform this review and continuous monitoring
effectively.
Finally, they should ensure that disclosures previously made under Article 3
and/or Article 6 SFDR are still accurate after having reviewed those procedures
and processes to integrate sustainability risks as well as a review of the
delegation arrangements.
If you have any further specific questions or queries in this regard or require
support in implementing the above, do not hesitate to reach out to our team.
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