1
Q
2 theories of regulation
A
1) Public interest theory of regulation - people act via government for the benefit of society and seek to prevent and control problems associated with free markets (e.g., imperfect competition, environmental damage, and other market failures with potential dangers to the public).
2) Private interest theories of regulation
- regulation as primarily originating from self-interested motives of various parties (e.g., legislators and other government employees, business competitors, and industry groups).
2
Q
3 principles of financial market regulation
A
1) Transparency
2) Market Integrity or fundamental fairness
3) Government protection of its economic and social systems through the rule of law
3
Q
Qualified Opportunity Zones
A
areas in the U.S. designated for special income tax breaks for investors of private equity projects and real estate developments in those areas
They are also economically distressed communities
4
Q
Investment management should involve analysis of ______ due to _____ changes.
A
risks and opportunities
regulatory and taxation
5
Q
4 primary investment related regulators in US
A
1) Securities and Exchange Commission (SEC) - primary regulator of key securities markets
- Financial Industry Regulatory Authority (FINRA) - non-governmental, self-regulatory organization (SRO), overseen by the SEC, that supervises and regulates the broker-dealer industry
- U.S. Commodity Futures Trading Commission (CFTC) - oversees the derivatives market with the goal of protecting market users and their funds, consumers, and the public from fraud and manipulation related to derivatives.
- National Futures Association (NFA) - regulation of futures trading
6
Q
The SEC’s responsibilities include
A
protecting investors;
maintaining fair, orderly, and efficient markets;
and facilitating capital formation.
7
Q
The SEC disclosure regime includes
A
principles-based disclosure requirements, which provide investors with material information about companies and securities offerings so they can make informed investment decisions.
8
Q
The 50 U.S. state securities commissions have blue sky laws, which are…
A
designed to protect state interests and prevent fraudulent activities within a state.
The SEC and state securities commissions share oversight authority and enforcement responsibilities
9
Q
4 primary US FEDERAL legislation that govern securities and investments
A
1) Securities Act of 1933 (Securities Act) - registration with the SEC of securities, unless an offering qualifies for an exemption. It serves to ensure that investors receive financial and other significant information about securities
- Securities Exchange Act of 1934 (Exchange Act) - governs trading of securities on the secondary market
- Investment Advisers Act of 1940 (Advisers Act) - registration and regulation by the SEC of entities that advise on securities investments and defines the responsibilities of an investment adviser
- Investment Company Act of 1940 (‘40 Act) - regulates the organization of companies (including mutual funds) that engage primarily in securities investing and whose own securities are offered to the investing public.
10
Q
Dodd Frank Act
A
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
most sweeping reform of asset management regulation in the U.S. since the 1940s.
- enacted after the global financial crisis.
- Intended to promote the stability of U.S. financial systems by improving accountability and transparency
- ending “too big to fail”
- protecting the U.S. taxpayer by ending bailouts
- protecting consumers from abusive financial services practices.
11
Q
Commodity Exchange Act (CEA) relates to
A
derivatives investing
12
Q
Employee Retirement Income Security Act of 1974 (ERISA) relates to
A
funds with certain types of retirement plan investors
13
Q
FINRA may require registration as a broker for those engaged in the business of ______ for the accounts of others.
A
transacting securities
14
Q
What determines with which agency does the adviser have to register?
A
Assets under management - AUM
15
Q
If under 25m USD AUM what is the registration requirement? Who is the regulator?
A
Generally no and the regulator is n/a
16
Q
When does a HF need to register with SEC?
A
1) Maintains a principal office and place of business in a state that does not require registration of investment advisers.
2) Maintains a principal office and place of business in a state where the investment adviser would not be subject to examination by the state securities commissioner.
3) Manages only HFs with AUM greater than $100 million and maintains managed accounts.
4) Manages HFs with AUM greater than $150 million and does not maintain managed accounts.
17
Q
When doesnt a HF need to register with SEC?
A
When AUM is under 100m and operates in a place where there is a need to register for investment advisors
18
Q
In addition to AUM requirements, who else needs to register with the SEC?
A
- Fund managers who manage a registered investment company or a business development company.
- Non-U.S.-based HFs with more than 15 U.S. clients and investors with AUM of more than $25 million.
19
Q
2 exemptions from registration
A
1) Venture capital fund adviser exemption - An adviser solely to one or more venture capital funds is exempt from registration.
2) Private fund adviser exemption - An adviser solely to private funds with less than $150 million in AUM is exempt from registration.
20
Q
SEC registration requirements for non-U.S. hedge funds are triggered for funds with ______ and investors with more than ____ AUM, unless exempt by the _____ exemption.
A
more than 15 U.S. clients
$25 million
private fund adviser
21
Q
Advisers to whom exemptions apply are required to file with the SEC a subset of information requested by ___.
A
Form ADV
22
Q
Registration with the SEC or the state imposes substantial _____ and _____ requirements on HF managers.
A
disclosure
regulatory
23
Q
Investments in derivatives may require registration under the CEA as a ____
A
Commodity Trading Adviser (CTA)
24
Q
anti-fraud prohibitions
A
assert the illegality of using any device, scheme, or deception to obtain money or property through the use of material misstatements or omissions;
or to engage in any transaction, practice, or course of business that operates as a fraud or deceit upon the purchaser.
25
12 matters regulated under the ADVISERS ACT
1. Advertising
2. Advisory agreement terms
3. Client solicitation
4. Compliance program
5. Custody
6. Gifts and entertainment
7. Performance fees
8. Personal securities reporting
9. Political contributions
10. Proxy voting
11. Record-keeping
12. Trading practices
26
Form ADV consists of 3 parts
1) Part 1 provides information about the hedge fund, its manager, and all associated persons; and is primarily used by regulators for administrative purposes.
2) Part 2 (composed of Part 2A and Part 2B) serves as a disclosure document for a business's prospective and existing clients; and includes extensive information, including types of advisory services offered, fees, conflicts of interest, and disciplinary information.
3) Form CRS explains how a fund interacts with investors (e.g., fees, costs, conflicts of interest, and the firm's legal or disciplinary history). The form must be provided to investors before they commit to a fund investment.
27
Form ADV is also used by advisers to
register with state securities authorities and to satisfy the legal requirement to provide certain written disclosures to clients.
28
When is the adviser legal required to deliver Form ADV Part 2 to its clients
initially,
annually,
and after certain disclosure items are updated.
29
For advisers who manage private fund clients (e.g., hedge funds), the client is the _____; thus, advisers must provide Form ADV Part 2 to the ______.
fund (not fund investors);
fund's general partner or managing member
30
Who regulates alternative investments?
SEC
31
What assumptions are used in regulating the alternatives?
that the products are designed for wealthy individuals that are sophisticated investors or have sufficient resources to protect themselves
32
How to determine if alternative invest product needs to be registered?
perform analysis under SECURITIES ACT and the 1940 ACT
33
Accredited investor is…
natural person with:
1. A net worth (along with his or her spouse) exceeding $1 million (excluding the value of the person's primary residence),
OR
2. Income of at least $200,000 in each of the past two years or $300,000 jointly with a spouse, with a reasonable expectation of having the same income in the current year.
34
Non accredited investors need _____and _____ in financial and business matters to make them capable of evaluating an investment's merits and risks
sufficient knowledge
experience
35
Private funds typically structure their offers and sales of interests as ______ based on _____ of the Securities Act, which is an exemption.
private placements
Rule 506
36
Rule 506 permits sales of fund interests to ______ of accredited investors or to _____ non-accredited investors
an unlimited number
at most 35
37
Private placement (i.e., unregistered interests) in funds may be offered via general solicitations or advertising if the following hold:
1. All purchasers are accredited investors.
2. The issuer takes reasonable steps to verify the purchasers' accredited investor status.
3. Some other conditions in Rule 506(c) of the Securities Act are met
38
most private funds use one of the two following exemptions.
1) Private investment fund exemption - Section 3(c)(1) of the 1940 Act
AND
2) Qualified purchaser fund exemption - Section 3(c)(7) of the 1940 Act
39
Funds must satisfy two tests for the private investment fund exemption under the Section 3(c)(7) of the 1940 Act.
i. At most 100 beneficial owners.
ii. No public offering (or proposal thereof)
40
To use Qualified purchaser fund exemption - Section 3(c)(7) of the 1940 Act, funds must be offered only to a qualified purchaser, which is one of the following:
i. A natural person with at least $5 million in investments.
ii. An institutional investor with at least $25 million in investments.
iii. An entity of which each beneficial owner is a qualified purchaser
41
What is the COO
Chief Compliance Officer
42
Under the Advisers Act, a registered adviser must do the following -
1. Designate a CCO who is responsible for policies and procedures.
2. Adopt and implement written policies and procedures that are reasonably designed to prevent, detect, and correct violations of the Advisers Act.
43
CCO is responsible for the following duties in administering the compliance program.
1. testing the effectiveness of the policies and procedures.
2. Reporting to senior management
44
Code of ethics does the following
sets forth standards of conduct and requires compliance with federal securities laws and is required to be established in writing, maintained, and enforced in the U.S. for any fund manager registered under the Advisers Act
45
access persons (e.g., the adviser's directors, officers, partners, and supervised persons with access to nonpublic information regarding securities transactions) are required to do the following -
1. Periodically report personal securities transactions and holdings.
2. Obtain preapproval from the adviser before investing in reportable securities, including IPOs or limited offerings (e.g., interests in HFs).
46
In marketing materials (advertisements), private fund managers are not allowed to use:
investor testimonials or endorsements
and performance must represent long periods of time, not focus only on specific time periods or successful trades (e.g., no cherry-picked stock selections).
47
Advertisement is
any written communication addressed to more than one person;
48
What are SEC exams and what are they designed for?
Examinations (not always announced) of SEC registered advisers
designed to improve compliance, prevent fraud, monitor risk and inform regulatory policy
49
Three types of SEC exams
1. Regular periodic inspections * These inspections are generally based on an adviser's promotional materials, including information in Form ADV, and aim to ensure no misleading or fraudulent statements.
2. Cause exams * triggered by tips, complaints, and referrals.
3. Sweep exams (or theme inspections) * used to review a compliance issue that the SEC considers a risk across multiple firms (e.g., use of soft dollars).
50
Summary of Short Selling Reporting Requirements
Many countries (e.g., in the EU and Hong Kong) require reporting by investors who hold net short positions in certain financial instruments
51
Summary of Pay to Plan and Lobbyist registration laws
A private fund adviser that solicits U.S. state or local government entities may be subject to registration and reporting obligations under applicable state or municipal statutes
52
Summary of Regulation D and blue sky renewal filings
A private fund that engages in private offerings that last more than one year may be subject to annual renewal filing requirements.
53
Summary of Form CPO-PQR reporting requirement
Advisers registered with the CFTC as CPOs or CTAs due to their investments in derivatives may also have to file Form CPO-PQR with the CFTC.
54
Summary of Summary of Form reporting requirement
A registered investment adviser with AUM private funds exceeding $150 million is required to file Form PF with the SEC.
Requires info on
- fund size
- leverage
- investor types
- concentration,
- liquidity,
- fund performance.
- investment strategy,
- counterparty credit risk
- use of trading and clearing mechanisms
55
Summary of Significant acquisition and ownership positions reporting requirement ([Section 13(d) of the Exchange Act)
Adviser who beneficially owns, in aggregate, more than 5% of a class of publicly traded voting equity securities may be required to file disclosure reports.
Which identify factors such
- source and amount of funds used for the acquisition
- purpose of the acquisition.
56
Summary of Discretion over $100 million in public equity reporting requirement ([Section 13(f) of the Exchange Act)
Investment adviser managing accounts, that, in aggregate, hold publicly traded equity securities with an aggregate fair market value of $100+ million may be required to file reports disclosing those holdings and the type of investment and the manager's voting authority.
57
Private funds are not required to provide investors any particular type of information, except
disclosures needed to prevent misleading investors
58
To meet institutional investors' demands for transparency, HFs typically...
provide inspection of
- fund books and records,
- quarterly or periodic letters,
- annual audited financial statements.
59
What is The European System of Financial Supervision (ESFS)
Framework (or network of authorities) that provides financial supervision in the EU and comprises three components.
60
3 components of ESFS:
Network of national competent authorities,
Joint Committee of the European Supervisory Authorities
and 4 major authorities
61
What is a COMPETENT AUTHORITY
regulator or other authority authorized to regulate or exert control
62
4 Other major authorities in the ESFS and their roles
i. European Systemic Risk Board (ESRB) * ESRB, an independent body in the EU, is responsible for macro-prudential oversight of the financial system in the
ii. European Securities and Markets Authority (ESMA) * ESMA is responsible for safeguarding the stability of the financial system by enhancing investor protection and promoting orderly markets and financial stability. ESMA's role in the AIFMD is one of legislation; it also has the power to write technical standards and bring about systems of mutual recognition.
iii. European Banking Authority (EBA) * EBA is responsible for safeguarding the banking sector's integrity, efficiency, and orderly functioning.
iv. European Insurance and Occupational Pensions Authority (EIOPA) * EIOPA is responsible for safeguarding the insurance sector and occupational pension.
63
3 key European regulations of alternatives:
1) National private placement rules (selling right in the EU or specific country),
2) Undertakings for Collective Investments in Transferable Securities (UCITS), covering collective investment schemes
3) Alternative Investment Fund Managers Directive (AIFMD) - regulates alternative investment fund managers
64
What is the relationship between AIFMD and non-UCITS investments (e.g., HFs, private equity, venture capital, and real estate funds)?
AIFMD applies to non UCITS investments
65
CIS
collective investment scheme is either a UCITS fund or an AIF
66
Difference Between UCITS and AIFs:
1) UCITS generally for retail investors with small investments, while AIFs is for large investments
2) UCITS are restricted to safe liquid assets, AIFs does not have limitations
3) UCITS limits leverage, AIFMs allows for reasonable leverage limits
67
AIFMD key features include the following:
1. AIFMs managing AIFs must be authorized, unless an exemption is available.
2. Restrictions are placed on the levels of remuneration for senior management and risk-takers.
3. AIFMs are required to set a maximum level of leverage for each AIF.
4. AIFMs are required to manage and monitor liquidity risks and conduct regular stress tests.
68
The AIFMD, with few exceptions, applies to the following:
1. AIFMs that manage or market AIFs (wherever those funds are established) in the EU.
2. AIFMs established outside the EU that manage AIFs established in the EU.
3. Non-EU AIFMs that market one or more AIFs (wherever established) in the EU.
69
The AIFMD's exemptions for funds and managers include the following (These AIFMs are not completely exempt from AIFMD: they are required to register with their local authority, among other obligations):
1) AIFMD excludes from its coverage holding companies; family offices (with no external capital); entities that manage pension schemes; employee savings schemes; employee participation schemes; securitization special purpose entities; national central banks; national, regional, and local governments and bodies; other institutions that manage social security and pension funds; and supranational institutions and similar international organizations that manage AIFs where those AIFs act in the public interest.
2. AIFMs are expempt if the only AIFs that they are managing is the Parent OR Subsidiary of that AIFMs
3. "Small" AIFMs whose AUM are below certain thresholds do not have to obtain full AIFMD authorization.
70
A partial exemption to the AIFMD regime is available to AIFMs managing AIFs with what minimum thresholds
The minimum thresholds are:
i. Less than €100 million; or
ii. Less than €500 million unleveraged, with no redemption rights for five years from the date of the initial investment.
71
To obtain and maintain authorization from the competent authority, EU AIFMs must meet certain requirements, including the following:
1. Meet initial and ongoing capital requirements
2. Have remuneration (payment) policies applicable to senior managers and staff whose professional activities have a material effect on the risk profile of the AIFM or any AIF that it manages.
3. Separate risk management functions from other operating units (including portfolio management).
4. Disclose (initially and ongoing) certain information to investors in AIFs marketed in the EU.
5. Comply with regulatory reporting requirements of the home member's competent authority.
6. Create an annual report for the AIF.
72
Marketing a fund in the EU triggers AIFMD compliance obligations for an AIFM (whether EU or non-EU). There are two methods that allow marketing of AIFs by AIFMs in the EU.
1. Marketing passport available under the AIFMD: once a fund is approved in one EU member country, the AIF can be marketed to professional investors located in other EU countries.
2. Marketing in a specific EU member country in accordance with that country's private
placement regime, subject to certain conditions.
73
what is a marketing passport
* A marketing passport permits marketing of AIFs to professional investors across the EU as a single marketplace.
74
The risk management function must operate based on _______, with ___________ as the core
document detailing the structure and operations.
formal written procedures
risk management procedures (RMP)
75
How does the Risk Management Activity need to operate to ensure that all risk in the AIFM and AIFs are appropriately measured, monitored, and managed on an ongoing basis.
Risk Management must be functionally and hierarchically separated from portfolio management; and must operate independently and with sufficient expertise, authority, and
resources
76
Risk monitoring is an ongoing process that includes
- periodic stress tests
- back tests
- random scenario analysis for potential changes in market conditions for each AIF and AIFM.
77
"Reporting to regulator" requirements under the AIFMD
Periodic reporting includes information pertaining to:
* Principal markets and instruments in which the AIFM trades on behalf of the AIFs that it manages.
* Main instruments traded .
* Principal exposures and important concentrations of each AIF managed .
* AIF's current risk profile and risk management systems used by the AIFMto manage risks (e.g., market, liquidity, counterparty, & operational).
* Stress test results
78
Annual report requirements under the AIFMD
Must include:
- balance sheet
- income statement,
- and any material changes for the past year and details regarding remuneration.
79
What should the AIFMs report when they acquire a majority stake in a private company?
- how the acquisition was made,
- if leverage was used and where it came from
- intentions for the future of the company
- effects on employment, and employment conditions.
80
What are "asset stripping rules", example and what do they prevent?
Impose restrictions on AIFMs' abilities to extract assets from the companies in the form of distributions (e.g., dividends), capital reductions, or share redemptions during the first two years following acquisition of control.
EX: an AIF cannot have a company in which they invest take out a loan and then distribute the loan proceeds to the AIF.
These rules prevent managers profiting at the expense of the fund and its investors.
81
For cases in which the host state (in the EU) and home state disagree, what can they do
either party can bring the issue to the ESMA, which facilitates negotiations between the parties and, if necessary, imposes binding mediation.
82
If a host state (EU) believes that a violation has occurred that is not within its jurisdiction, the host state may
refer this information to the authorities in the AIFM's home state.
83
ESMA's enforcement power is subject to the AIFMD sovereignty exception which states that:
member states MAY refuse to cooperate if "cooperating adversely affects the sovereignty, security, or public order of the member state addressed."
I.E. MATTER OF NATIONAL SECURITY
84
what is a SIF
Specialised Investment Fund
Formed in Luxembourg and limited to "qualified investors."
85
what is a "Societe d'Investissement a Capital Variable" (SICAV)
Formed in Luxembourg as a public limited company (e.g., PLC or SA) with variable share capital.
86
What is a Reserved Alternative Investment Fund (RAIF)
- Luxembourg vehicle used by many AIFs .
- Combines traits and structuring flexibilities of Luxembourg-regulated SIFs and SICARs, qualifying as AIFs managed by an authorized AIFM.
- Not subject to approval by the Luxembourg regulator (CSSF) before
they are launched.
87
What is a CCF and its major benefit
Common Contractual Fund.
- Irish contractual arrangement established under a deed that provides that investors participate as co-owners of fund assets (i.e., investors are
treated as if they directly own a share of the underlying assets rather than owning shares in an entity that owns the assets).
- Unincorporated body, not a separate legal entity; transparent for Irish legal and tax purposes.
- Can be established as a UCITS or an AIF .
Major Benefit: taxed as if directly invested into the asset (lower taxes than via a corporate vehicle)
88
What is a Unit Trust
- Contractual fund structure constituted by a trust deed between a trustee and a management company (manager).
* Not a separate legal entity; thus, the trustee acts as legal owner of the fund's assets on behalf of the investors.
* A separate management company is always required and managerial responsibility rests with the management company's board of directors.
89
What is ICAV
Irish Collective Asset-Management Vehicle
Designed for Irish investment funds. The vehicle's purpose is to minimize administrative complexity and cost of establishing and maintaining CISs in Ireland.
* Can be used by UCITS and AIFs .
90
Investment company / variable capital company
The main aim of investment companies is the collective investment of its funds and property with the goal of spreading investment risk.
* Shareholders have limited liability .
* Used by UCITS and AIFs.
91
4 major Asian Finance Hubs
Hong Kong, Japan, South Korea and Singapore
92
Factors that induce fund managers to set up in Hong Kong.
1. Developed and sophisticated securities and banking infrastructure.
2. Serves as the Asian hub for many global leading prime brokers, custodians, and administrators.
3. Leading financial market for the greater China region.
93
2 major GOV entities that manage asset management
1) Securities and Futures Ordinance (SFO) is the primary legislation for regulation of asset management activity
2) Securities and Futures Commission (SFC) is the
regulator responsible for overseeing the SFO.
94
Funds must meet the following authorization requirements in Hong Kong
Public offer sale to Hong Kong investors generally requires authorization by the SFC.
To avoid the cost of registration, alternative fund
managers offer their funds as PRIVATE PLACEMENTS, which have no requirements to obtain SFC authorization.
95
Funds must meet the following requirements regarding marketing in Hong Kong
Private sales to a Hong Kong resident does not trigger licensing or fund registration. Marketing MUST NOT be made to the public, since funds offered to the public must to be authorized by the SFC.
96
Funds offered on a private placement or unsolicited basis do not need to be authorized by the SFC (Hong Kong) if the following conditions are met:
i. Offers are made to no more than 50 persons.
ii. Offers with a minimum subscription amount of HKD 500,000.
iii. Offers with the maximum offering of shares valued at HKD 5 million.
iv. Offers made to "professional investors" (e.g., most financial institutions and intermediaries, but not individual investors or a holding company owned by an individual).
97
What is the SFA and MAS?
Securities and Futures Act (SFA) is the primary legislation for regulation of asset management activity in Singapore
Monetary Authority of Singapore (MAS) is the regulator responsible for administering the SFA. The MAS regulates all financial institutions in Singapore including fund managers.
98
investment funds types in Singapore
1) collective investment schemes (CISs).
2) Variable capital company (VCC)
99
VCC major selling points
1) Provides fund managers more flexibility to vary capital and provides economies of scale via the use of an umbrella fund, which consists of several sub-funds with segregated assets and liabilities and shared administrative functions (e.g., board of directors and service providers).
2) VCCs provide CISs greater flexibility to vary their capital structure and redeem shares when investors exercise their redemption rights
3) VCCs complement existing structures used by fund managers: 1) unit trusts, 2) companies incorporated under the Companies Act of Singapore, and 3) limited partnerships governed under the Limited Partnerships Act.
100
Funds must meet the following requirements regarding marketing in Singapore
Marketing of a fund in Singapore is a regulated activity and is viewed separately from the authorization/recognition and prospectus requirements for the fund.
To market a foreign CIS in Singapore, a license is required or the offer needs to be made via a local licensed intermediary (i.e., placement agent).
101
Funds must meet the following authorization requirements in Singapore
HF managers must meet licensing requirements based on the SFA = fund management business must hold a capital markets services (CMS) license or be registered with the MAS as a registered fund management company (RFMC).
102
HF managers in Singapore are not required to obtain a CMS license if the following applies:
i. Perform fund management in Singapore on behalf of at most 30 qualified investors (of which at most 15 may be funds or limited partnerships).
ii. Total value of assets managed does not exceed an amount stated in the regulations (e.g., S$250 million).
iii. Registered with the MAS as a RFMC.
103
What is the VCFM regime in Singapore and by whom is it used?
Venture capital managers may use the venture capital fund manager (VCFM) regime, under which they are still required to hold a CMS license; but the application process is shorter, simplified, and some regulatory requirements are removed
104
Offers of interests in a fund to Singapore residents may generally be made only in the following cases.
i. The fund has been authorized or recognized by the MAS. (Authorization involves MAS registering a fund that is established locally, and recognition involves MAS registering a fund that is established oversees)
ii. The offer is accompanied by a prospectus prepared in accordance with the SFA that has been registered with the MAS.
105
Offers of interests in an investment fund in Singapore cannot be made unless the following hold.
i. The fund is authorized or recognized under the rules of the SFA.
ii. Offers of interests are accompanied by a prospectus prepared in accordance with the requirements prescribed in the MAS.
106
HF managers in Singapore typically use an exemption from the CMS licensing requirement; why do they do that?
may enable them to avoid the authorization process and prospectus requirement if certain criteria are met.
107
(CMS) license in Singapore
Capital Markets Service License
108
what is a RFMC in Singapore
registered fund management company
109
What is the FSCMA, FSC and FSS?
Financial Investment Services and Capital Markets Act (FSCMA) and its regulations are the primary legislation for regulation of asset management activity.
The Financial Services Commission (FSC) is the primary regulator and directs the FSS
Financial Supervisory Service (FSS) is responsible for inspection of financial institutions and enforcement of regulations as directed by the FSC.
110
Funds must meet the following requirements regarding marketing in South Korea
Marketing activities (even when directed only to qualified professional investors) must be carried out via a local Korean distributor, which includes Korean securities companies,
banks, and insurance companies that are licensed to distribute funds. A sale on an unsolicited basis should not trigger fund registration.
111
Funds must meet the following requirements authorization marketing in South Korea
All offshore funds offered or sold to Korean investors must be registered with the FSC.
Funds offered only to "qualified professional investors" (e.g., Korean government, Bank of Korea, certain financial institutions, certain pension funds, certain corporate investors such as listed companies, and certain high net-worth individuals) have lower eligibility requirements than those sold publicly.
112
What is the the FIEA, ITIC and KLFB?
Financial Instruments and Exchange Act (FIEA) and the Act on Investment Trust and Investment Corporation (ITIC) are the primary legislation for regulation of asset management
activity in Japan.
The Kanto Local Finance Bureau of Ministry of Finance Japan (KLFB) is the regulator for purposes of disclosure in Japan under the FIEA
113
Funds must meet the following requirements regarding marketing in Japan
Marketing of fund interests is heavily regulated. Entities that want to market funds to investors in Japan must register with the Financial Services Agency of Japan.
Registration is not required for offshore funds not directly marketed to Japanese investors. Further, Japanese regulators may periodically ban acquisition of certain types of
investments
114
Funds must meet the following requirements regarding authorization in Japan
Any entity that provides discretionary investment management of a Japanese client's assets (including certain types of collective investment schemes) must register as an investment manager and provide ongoing reports to the regulator on the fund's business condition.
Offshore fund general partners with representatives in Japan may be able to use a registration exemption under Article 63 of FIEA. However, this exemption is limited, and
those taking advantage of it still have to comply with a heavy regulatory burden.
CAIA L2
flashcards
Decks in class (24)
# Cards
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Reading 1.120
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Reading 1.249
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Reading 1.354
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Reading 1.431
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Reading 1.521
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Reading 1.655
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Reading 1.718
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Reading 1.846
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Reading 2.138
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Reading 2.2114
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Reading 2.330
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Reading 2.453
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Reading 2.551
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Reading 3.135
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Reading 3.272
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Reading 3.363
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Reading 3.436
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Reading 3.555
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Reading 4.136
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Reading 4.261
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Reading 4.350
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Reading 4.445
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Reading 4.563
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Reading 5.113
