Capital markets and structured investments

No.

Generally

The Australian funds management industry is mature and heavily regulated. An Australian hedge or debt fund is usually structured as a unit trust and would ordinarily fall within the definition of a ‘managed investment scheme’ in the Corporations Act 2001 (Cth). That Act imposes a wide range of obligations and requirements on the operators of managed investment schemes. Managed investment schemes are regulated by ASIC

Managed investment schemes

The following key restrictions apply when establishing a managed investment scheme:

• managed investment schemes, particularly those offered to ‘retail clients’ (as that term is defined in the Corporations Act 2001 (Cth)), are subject to relatively heavy regulatory requirements which may impose a significant compliance burden on the operators of such schemes;
• the operator of the managed investment scheme (which is called the 'Responsible Entity') must hold an Australian Financial Services License (AFSL) issued by ASIC (or be an authorized representative of another entity's AFSL) which authorizes it to act as the Responsible Entity of managed investment schemes;
• a managed investment scheme which is offered to retail clients must be registered with ASIC;
• if a managed investment scheme is structured as a unit trust (as is usually the case), general trust law will apply to the operation of the trust; and
• the offer of interests in a managed investment scheme to retail clients will require the preparation of a detailed disclosure document, the contents of which is heavily regulated.

Managed investment schemes may also be listed on the Australian Securities Exchange, provided that a range of regulatory requirements are met.

The AIFM Law provides a regulatory framework for alternative investment fund managers (AIFM) governed by either Belgian law or the laws of an EEA or non-EEA member state that are managing alternative investment funds (AIF) governed by Belgian law or marketing EEA or non-EEA AIFs in Belgium.

The Alternative Investment Fund Managers Directive (AIFMD) only applies to the (external or internal) AIFMs but it provides each member state with the option to also regulate on a national level the AIFs established in such member state. The Belgian legislator opted to keep the existing legislation with respect to public and specific non-public AIFs (including their managers) and to restate this legislation (with certain modifications) into the AIFM Law. The AIFM Law’s scope is therefore broader than the AIFMD.

In line with the AIFMD, certain types of funds are excluded from the AIFM Law’s scope of application. These include Undertakings for Collective Investment in Transferable Securities (UCITS), holding companies, institutions for occupational retirement provision and securitization special purpose entities.

The AIFM Law lays down a broad set of rules regarding, among other things, authorization, operating conditions (for example, rules on remuneration, conflicts of interest, risk management, liquidity management, valuation, delegation and acting as a depositary), transparency requirements for AIFMs (annual report, disclosure to investors, and reporting obligation to competent authorities) and special obligations for AIFMs managing specific types of AIFs, such as leveraged AIFs or AIFs which acquire control of non-listed companies and issuers (notification, disclosure, annual report, asset stripping). Furthermore, the AIFM Law contains a passport mechanism for management and/or marketing for EEA AIFMs managing or marketing EEA AIFs. The AIFM Law provides for a ‘light regime’ whereby certain smaller AIFMs (eg Belgian private equity fund managers) will not have to comply with the requirements under the AIFM Law unless they choose to opt in.

The UCITS Law provides a regulatory framework and introduces a simplified notification procedure for UCITS that wish to market their units in member states other than those in which they are established.

The UCITS Law provides certain obligations that must be taken into account, such as the publication of a prospectus and the prior approval of advertising materials and a key investor information document by the Financial Services and Markets Authority (Autorité des services et marchés financier/Autoriteit voor Financiële Diensten en Markten) (FSMA). The public offering of a UCITS also triggers an obligation to register the UCITS with the FSMA.

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities and therefore subject to regulation by the Brazilian Securities Commission (CVM). According to Law No. 10,303 of 31 October 2001 the regulation and supervision of financial and investment funds (originally regulated and supervised by the Central Bank) were transferred to CVM.

The establishment and operation of a fund and the offering of fund securities is subject to regulation under the securities legislation and the oversight of the securities commission of each province. Private equity funds and hedge funds are only indirectly regulated unless they file a prospectus; however, such funds may only sell their securities in compliance with available prospectus exemptions, and must comply with applicable dealer registration requirements.

Each of Canada’s ten provinces and three territories has its own securities laws, administered by a local securities regulatory authority. However, in a growing number of areas, including investment fund regulation, the rules have been largely harmonised across the 13 jurisdictions.

The key regulatory instruments that apply to offering fund securities and operating a fund, among other things are:

• National Instrument 81-101 – Mutual Funds Prospectus Disclosure (NI 81-101) that regulates projects disclosure requirements for mutual funds;
• National Instrument 81-102 – Investment Funds (NI 81-102) that sets out core investment restrictions and fundamental operational requirements;
• National Instrument 81-105 – Mutual Funds Sales Practices (NI 81-105) that regulates the sale of mutual funds;
• National Instrument 81-106 – Investment Fund Continuous Disclosure (NI 81-106) that sets out continuous disclosure requirements for investment funds; and
• National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that regulates registration requirements and the activities of registrants.

Law No. 20,712 regulates the administration of third parties’ funds (Law). The Law regulates mutual funds, public and private investment funds, foreign capital investment funds and foreign risk capital investment funds. Please note that there is no explicit regulation on hedge funds, which may adopt one of the aforementioned funds form, depending on its particular characteristics.

In general terms, restrictions on establishing a fund depend on the type of fund to be established.

The Law distinguishes between two types of funds that are subject to registration and supervision of the CMF, which are:

• mutual funds, which are the ones in which redemption is made in less than 10 days; and
• investment funds, distinguishing between the ones (x) in which redemption is available in less than 180 days, or (y) in which there is no redemption available (fondos de inversión no rescatables).

A separate category of funds which are not subject to registration nor supervision of the CMF is private investment funds, which are required to have less than 50 investors.

The above-mentioned distinction between mutual and investment funds, which is based on how the investment is redeemed, follows the traditional distinction between closed-end and open-end funds in the US. Since both mutual funds and investment funds (other than private investment funds) are subject to registration with the CMF, they can be also listed on the local stock exchanges or traded over-the-counter in a secondary market.

Additionally, please note that there are some restrictions regarding investments, which refer to minimum conditions of information, regulation and supervision of such investments. Such restrictions are not applicable to funds for qualified investors, as long as such exemption is expressly set forth in the fund’s internal regulation.

Under Decree 2555 of 2010 (Decree 2555), investment fund administration is a task that only brokers, investment administration corporations and trusts companies can perform. Moreover, in Colombia the securities of investment funds are not negotiated on the same platform used to negotiate stocks as a specific negotiation platform has been developed for listed investment fund securities. There is also regulation for specific types of investment fund, such as currency market, real estate, speculation and margin.

Generally

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the Act on Investment Companies and Investment Funds and therefore are subject to regulation by the Czech National Bank.

Collective investment is usually a business activity involving collection of financial funds from investors for investing into something based on a pre-defined investment policy for the benefit of people whose funds were collected for such purpose.

Generally

Establishing a fund, offering fund securities and operating a fund, amongst other things, are regulated activities under the Act on Mutual Funds (the MFA). The MFA governs common funds, which are Undertakings for Collective Investments in Transferable Securities (UCITS) funds as provided in the Undertakings for Collective Investments in Transferable Securities Directive,.

Mutual fund activity is defined in the MFA as raising of funds from the public for their joint investment and the investment thereof mainly in financial instruments as well as the management of a common fund and the marketing of units in accordance with the UCITS Directive and the MFA.

Only a management company authorized as provided in the MFA may establish one or more common fund (UCITS fund) and carry out mutual fund activities.

Only a management company authorized or registered as provided in the Act on Alternative Investment Fund Managers may establish one or more special common fund or other alternative investment fund.

Custodial activity of a common fund, a special common fund or other alternative fund may only be carried out by a custodian, which has an authorization for the custodial activity.

Depending on the characteristics of the fund (offered to professional or nonprofessional investors), alternative investment funds (AIFs) must be authorized by or notified to the Financial Markets Authority (Autorité des Marchés Financiers) (AMF).

Establishing a fund is regulated under the German Capital Investment Code (Kapitalanlagegesetzbuch – KAGB).

The Securities Industry Act, 2016 (Act 929) sets out rules for the establishment of funds under the regulatory authority of the Securities and Exchange Commission.

These include requirements for a license to operate, appointment of trustee, manager and custodian, minimum capital and approval of prospectus by the Securities and Exchange Commission.  

Hedge funds, private equity funds, venture capital funds, and collective investment schemes (mutual funds and unit trusts) all require a license from the Securities Exchange Commission as is also the case for fund managers, trustees, and custodians.

Specific provisions of the Securities Industry Act together with the Unit Trusts and Mutual Funds Regulations, 2001 (LI 1695) establish the regime governing the establishment and operation of mutual funds and units trusts.

Pension fund trustees require a license from the National Pensions Regulatory Authority established under the National Pensions Act, 2008 (Act 766). Trustees must be trust companies set up solely for that purpose; pension fund managers must be registered with the National Pensions Regulatory Authority.

Generally

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the Act XVI of 2014 on Collective Investment Trusts and Their Managers, and on the Amendment of Financial Regulations and is therefore subject to regulation by the National Bank of Hungary.

Collective Investment Trusts

The regulations apply to activities undertaken in relation to ‘Collective Investment Trusts‘ which means any form of collective investment which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors.

Ireland is regarded as a key strategic location by the world’s leading investment funds players; attracting significant levels of foreign investment. It is Europe’s top hedge fund domicile and is the largest hedge fund administration centre in the world.

The Central Bank of Ireland is responsible for the authorization and supervision of collective investment schemes established in Ireland, including regulated investment funds and investment managers. Regulated funds and fund service providers must also comply with the Central Bank of Ireland’s fitness and probity requirements for persons performing certain prescribed roles within those entities.

Generally

In general terms, the establishment, marketing and management of Italian investment funds (having either contractual or corporate form) are regulated activities, exclusively reserved to duly licensed entities, subject to authorization requirements and ongoing supervision and to be performed in compliance with the relevant rules and regulations.

Collective Investment Schemes

Under the Italian regulatory framework, the overall operation and activities of Collective Investment Schemes shall comply with a set of rules and provisions, involving, inter alia:

• disclosure and authorization procedures vis-à-vis the competent supervisory authorities in relation to:
  • the funds, especially when qualifying as retail funds (in this context the applicable provisions set forth different requirements regarding, inter alia, minimum content of the fund documents, disclosure obligations of such fund documents vis-à-vis the supervisory authorities, investment limits, risks fractioning and diversification requirements etc); and
  • the management companies (in this context, the applicable provisions require, inter alia, the obtainment of an authorization to perform collective asset management activities, the compliance with sound and prudent management safeguards, as well as with minimum capital requirements and ongoing prudential thresholds, transparency provisions towards the investors and rules of conduct); and
• procedures to be followed for the promotion, offer and marketing of the funds, differently modulated based on the cross-border operation, if any, the target investors (retail or professional), the type of vehicles etc.

Generally, the rules set forth for retail funds are more stringent than those relating to reserved funds exclusively for professional investors. Fewer and less stringent investment limits, for example, are imposed on reserved funds, as well as less onerous disclosure and reporting requirements.

Generally

Establishing and operating a fund, offering fund securities are regulated activities under the General Regulations of the CREPMF and therefore subject to regulation by that organization and other organizations.

Collective Investment Schemes

Collective investment schemes include the following arrangements:

Undertakings for Collective Investment in Transferable Securities (UCITS) are financial institutions that collect savings from economic actors and issue stocks or shares. The savings collected are used to set up securities portfolios and to provide financing for businesses.

The activities of UCITS are classified collective asset management which has two subcategories:

• Management for proper account: funds collected from third parties by the fund are invested in all types of securities and other financial products such as bonds, equities, negotiable debt securities and the like.
• Discretionary management: the fund is managed privately as the collective investment funds belong to third parties.

Generally

The establishment of a fund, the offering of fund interests and the operation of a fund are regulated under the Financial Instruments and Exchange Act (including applicable secondary legislation such as any relevant Cabinet Order and Cabinet Office Ordinance) and subject to regulatory oversight by the Financial Services Agency.

Collective investment schemes

The regulations apply to the offering of interests in collective investment schemes, which include the following interests (subject to certain specific exceptions detailed in relevant legislation):

• the right to receive dividends of profits or a distribution of assets arising from businesses by way of cash, securities and/or bills of exchange contributed by equity owners (equity partners); and
• the rights emanating from a partnership contract, an anonymous partnership agreement, an investment limited partnership agreement, a limited liability partnership agreement or the membership rights of an incorporated association.

Generally

Establishing a fund, offering a fund and operating a fund, among other things, are regulated activities and are therefore subject to supervision of the Commission de Surveillance du Secteur Financier. Reserved alternative investment funds (RAIF) as well as partnerships (qualifying as alternative investment funds) are exempt from being subject to the supervision of the Commission de Surveillance du Secteur Financier. However, these investment funds will have to appoint an alternative investment fund manager who is in turn subject to the supervision of the Commission de Surveillance du Secteur Financier.

Collective investment schemes

The Commission de Surveillance du Secteur Financier has set out the following specific restrictions in relation to hedge funds in its Circular 02/80:

• risk diversification rules regarding short sales;
• borrowings;
• restrictions applicable to investments in target Undertakings for Collective Investment; and
• use of derivative financial instruments and other techniques.

There are no other specific restrictions in relation to hedge or debt funds other than those mentioned in the relevant laws.

Establishing a fund, offering securities in a fund and operating a fund, among other things, are activities requiring a license under the Securities Act 2005 and are regulated by the Financial Services Commission.

The establishing of an investment fund requires authorization from the National Banking and Securities Commission (CNBV). The authorization request is required to include, among other information, a draft copy of the by-laws, the names of the founding shareholders and the members of the board of directors of the management company and a draft copy of the prospectus.

All regulated funds are treated the same way and are referred to as mutual funds in Mexico. Mexican law does not generally distinguish between open-ended and closed-ended funds or retail and hedge funds. They are defined differently under the Investment Funds Law (Ley de Fondos de Inversión): the defining characteristic of an open-ended retail fund is that it has the legal obligation to repurchase or redeem its own shares while it is expressly forbidden for a closed-ended retail fund to repurchase its own shares from its investors if they are not listed on any stock exchange. In practice, closed-ended retail funds are rare in Mexico.

There are some restrictions regarding the establishment of a fund.

Thus, legal structures adopted by investment funds belongs to one or the other of the following two categories:

• Venture capital investment funds that may take the form of Venture capital companies or Venture capital mutual funds;
• Conventional vehicles (public limited company (SA) or joint stock company (SAS)).

In addition, venture capital investment funds (organisme de placement en capital risque) (OPCR) and real estate investment funds (organisme de placement collectif en immobilier) de (OPCI) must be approved by the AMMC.

Undertakings for Collective Investment in Transferable Securities (UCITS)

According to Dutch law, no party may offer units in UCITS in the Netherlands:

• unless the management company of the UCITS has been licensed by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) to manage UCITS or is otherwise exempt form this license obligation; or
• in the case of a company for collective investments in securities without a separate management company, if the company for collective investments has not been licensed by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) or is otherwise exempt from this license obligation.

Alternative Investment Funds

According to Dutch law, no party may offer units in a collective investment scheme in the Netherlands:

• unless the management company of the collective investment scheme has been licensed by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) to manage collective investment schemes or is otherwise exempt form this license obligation; or
• in the case of a collective investment company without a separate management company, if the investment company has not been licensed by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten) or is otherwise exempt form this license obligation.

The establishment, management and offering of funds (managed investment schemes) are regulated under the Financial Markets Conduct Act 2013.

A managed investment scheme means a scheme to which each of the following applies:

• the purpose or effect of the scheme is to enable persons taking part in the scheme to contribute money, or to have money contributed on their behalf, to the scheme as consideration to acquire interests in the scheme;
• those interests are rights to participate in, or receive, financial benefits produced principally by the efforts of another person under the scheme (whether those rights are actual, prospective, or contingent, and whether they are enforceable or not); and
• the holders of those interests do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions).

An interest in managed investment scheme is a managed investment product.

Yes.

Establishing a fund or the fund management and marketing of units in funds towards the public, among other things, are regulated activities under the Securities Fund Act of 2011 or the Alternative Investment Fund Managers Act of 2014 and therefore subject to supervision by the Norwegian Financial Supervision Authority.

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the following laws:

• private pension funds – regulated under the General Act of the Financial and Insurance Systems and Internal Organization Act of the Superintendence of Banking and Insurance (Ley General del Sistema Financiero y del Sistema de Seguros y Orgánica de la Superintendencia de Banca y Seguros) and its Regulations and therefore subject to the regulations of the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS);
• investment funds – regulated under the Investment Funds and their Management Companies Act and its Regulation and therefore subject to the regulation of the Superintendence of Securities Market (SMV);
• mutual funds – regulated under the Securities Market Act and its Regulations and therefore subject to the regulations of the SMV; and
• collective funds – regulated under the Collective Fund Act (A las Empresas Administradoras de Fondos Colectivos contralará SMV) – Executive Order 21907 and its Regulations and therefore subject to the regulations of the SMV.

An investment fund may be established through a general regime or a simplified regime.

All funds are subject to the general regime unless offers are:

• exclusively directed to institutional investors;
• directed to investors that will pay certain minimum quotas before the funds can operate; or
• directed to the management company’s shareholders, directors and members of the ‘Investment Committee’.

The incorporation of an investment fund under the simplified regime is automatically approved upon the submission of the required documentation. On the other hand, the incorporation of a fund under the general regime is subject to the approval and authorization of the SMV.

Generally

Establishing a fund, offering fund securities, and operating a fund are regulated activities under the Investment Funds and Alternative Investment Fund Managers Act.

Under Polish law, funds can be established in the form of an open-ended investment fund, a special investment fund, a closed-ended investment fund, or an alternative investment company. Open-ended investment funds are compliant with the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. Closed investment funds and alternative investment companies are Alternative Investment Funds (AIFs). An investment fund is formed by the Investment Fund Company (Towarzystwo Funduszy Inwestycyjnych), which manages and represents the fund in its relations with third parties. The establishment of a public fund requires the consent of the Polish Financial Supervisory Authority.

Investment funds are subject to registration in the Investment Funds Register.

Collective investment schemes

Collective investment schemes are regulated under the UCITS Directive, which has been implemented in Poland. UCITS operate in Poland in the form of open-end investment funds.

Generally

The establishment of investment funds and commercialization of investment funds' units is supervised by the Portuguese Securities Market Commission and the Bank of Portugal, under the terms of the Legal Regime on Undertakings for Collective Investment in Transferable Securities.

Funds are one form of collective investment undertaking (which may be structured as a public limited company which are subject to further regulation). The conditional documents and proposed activities of funds require prior authorization from the Portuguese Securities Market Commission.

Collective investment schemes

In Portugal, there are two types of collective investment schemes.

Investment companies (Sociedades de Investimento)

Investment companies are typically structured as public limited companies and are generally governed by the Commercial Companies Code and the Legal Regime on Undertakings for Collective Investment in Transferable Securities (except for certain activities that may conflict with typical activities of a collective investment scheme such as mergers, demergers or transformation regimes). Investment companies may be self-managed.

Investment funds

Investment funds consist of an autonomous pool of assets. They do not have any legal personality and must be managed by a management entity. Investments funds are comprised of participation units and governed by the Legal Regime on Undertakings for Collective Investment in Transferable Securities. Unlike investment companies, investments funds may not be self-managed.

The principal restriction in establishing a fund in Puerto Rico is the applicability of the Puerto Rico Investment Companies Act of 2013 or the US Investment Company Act of 1940. In addition, there are laws that regulate the establishment of certain investment funds and grant special tax treatment to the fund and investors in the fund. One such example is Act 185 that authorizes the establishment of private equity funds that do not invest in publicly traded securities and in investments in Puerto Rico.

In order to comply with the Romanian legislation, investment vehicles must be established in accordance with the following conditions.

Undertakings for Collective Investments In Transferable Securities (UCITS)

UCITS for which Romania is home member state, may only operate based on the authorization issued by the Financial Supervisory Authority (FSA).

The FSA authorization shall not be issued in case:

• the persons who effectively manage the fund do not have the reputation or necessary experience to perform activities which are specific to a certain type of UCITS; or
• the UCITS is restricted by law (including by inserting a provision in the rules of the fund or in the articles of association of the company) to distribute all the participation titles on the territory of Romania.

Open-ended investment funds

The initiative for setting up an open-ended investment fund belongs exclusively to the investment management company, in accordance with the decision of the board.

Open-ended investment funds are managed by an investment management company. Therefore, a prerequisite for obtaining a license from the FSA is to have a license for the investment management company or the consent of the FSA with regards to an investment management company’s request from a member state to manage the respective investment fund.

Open-ended investment companies

Open-ended investment companies must be licensed by the FSA (the licensing requirements for open-ended investment funds are also applicable to open-ended investment companies). Such companies may be managed either by their board of directors or by a separate investment management company.

Open-ended investment companies may not perform other activities than:

• operating collective investments by placing financial resources in financial instruments (as provided by law) based on the risk diversification and prudent administration principle; and
• ensuring that the value of the titles for participation on a market does not vary significantly in relation to the value of the net unit asset.

The initial capital of investment companies managed by their board of directors must amount to at least the RON equivalent of €300,000.

Open-ended investment companies must request the trading admission on a regulated market within 90 days from the issuance of the FSA authorization.

Alternative Investment Funds (AIFs)

Each AIF is administered by an AIF manager (AIFM) which may be an external manager. In case the AIF is self-administered, the provisions related to AIFMs are also applicable.

The AIFM must fulfil the following requirements:

• it must be authorized by the FSA; and
• in order to be authorized:
  • the AIFM must have initial share capital and sufficient own funds in accordance with the law;
  • the persons who effectively manage the AIFM must have the reputation or necessary experience as required by the FSA;
  • the day-to-day management must be ensured by at least two persons meeting such conditions;
  • the AIFM shareholders that have qualifying holdings must meet the requirements of the need to ensure sound and prudent management of the AIFM; and
  • the head office and registered office of the AIFM must be located in Romania.

Generally, under Russian law, a fund may be established in one of the following ways:

• as an investment fund in the form of a Russian joint-stock company (JSC Investment Fund); or
• as a mutual fund being a separate portfolio of assets which does not hold the status of a legal entity (Mutual Fund).

To perform its investment activities, a JSC Investment Fund must obtain a special license from the Central Bank of the Russian Federation (CBR) and meet certain other criteria established by Russian law, such as keeping a certain level of its own funds, holding a separate bank account for all its operations connected with trust management or meeting specific corporate governance requirements. Furthermore, it is worth noting that the JSC Investment Fund is not allowed to place any securities, except for its ordinary shares.

Although a Mutual Fund itself is not a legal entity, the law requires that its assets portfolio be managed under a trust management agreement by a special management company holding a CBR license. The law contains specific rules that apply to such management companies and trust management agreements, for instance a management company is required to register the rules of trust property management with the CBR or maintain certain financial levels.

Generally

Establishing and operating a fund, offering fund securities are regulated activities under the General Regulations of the CREPMF and therefore subject to regulation by that organization and other organizations.

Collective Investment Schemes

Collective investment schemes include the following arrangements:

Undertakings for Collective Investment in Transferable Securities (UCITS) are financial institutions that collect savings from economic actors and issue stocks or shares. The savings thus collected are used to set up securities portfolios and to provide financing for businesses.

The activities under UCITS are classified collective asset management composed of two subcategories:

• Management for proper account: funds collected from third parties by the fund are invested in all types of securities and other financial products such as bonds, equities, negotiable debt securities and the like.
• Discretionary management: the fund is managed privately as the collective investment funds belong to third parties.

Generally

Establishing a fund, offering fund securities and operating a fund (ie fund management), among other things, are regulated activities subject to regulation by the Monetary Authority of Singapore.

Collective Investment Schemes

There are additional requirements which apply to activities undertaken in relation to 'Collective Investment Schemes' which are schemes comprising the following arrangements (subject to certain specific exceptions set out in the legislation):

• with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by acquiring any right, interest, title or benefit in the property or any part of the property or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of any right, interest, title or benefit in the property or to receive sums paid out of such profits or income;
• where the participants do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions;
• pooling of investors' contributions and profits or income; and
• the property is managed as a whole by or on behalf of a manager.

Generally

Establishing, operating and abolishing a fund are regulated by the Act on Collective Investment and subject to supervision of the National Bank of Slovakia.

Collective Investment

The regulations apply to activities undertaken in relation to collective investment which is a business activity comprising the following arrangements:

• collecting funds from investors in order to invest in accordance with a defined investment policy for the benefit of those persons from whom funds were collected;
• if the funds are collected from the public, collective investment can be carried out only on the basis of risk spreading;
• collective investment can be carried out only by creating a domestic collective investment entity, or by collecting funds through the offering of securities or investing in a foreign collective investment entity.

Generally, funds in South Africa are classified as collective investment schemes and are regulated by the Collective Investment Schemes Control Act (CISCA).

A Collective Investment Scheme is defined in CISCA as ‘a scheme, in whatever form, including an open-ended investment company, in pursuance of which members of the public are invited or permitted to invest money or other assets in a portfolio, and in terms of which:

• two or more investors contribute money or other assets to and hold a participatory interest in a portfolio of the scheme through shares, units or any other form of participatory interest; and
• the investors share the risk and the benefit of investment in proportion to their participatory interest in a portfolio of a scheme or on any other basis determined in the deed’.

The primary forms of collective investment schemes are detailed in Establishing and investing in debt and hedge funds – common structures.

South Africa has recently received a credit-rating downgrade, which has prompted issuers to sidestep the bond market and opt for less public forms of fundraising. A number of South Africa's state-owned entities are in precarious financial positions with their respective corporate governance structures coming under increasingly intense public scrutiny.

The definition of ‘Hedge Fund’ for the purpose of applying CISCA is ‘an arrangement in pursuance of which members of the public are invited or permitted to invest money or other assets and which uses any strategy or takes any position which could result in the arrangement incurring losses greater than its aggregate market value at any point in time, and which strategies or positions include but are not limited to (a) leverage; or (b) net short positions.’

Although Collective Investment Schemes do not need to be registered, all companies which wish to manage collective investment schemes (Management Companies) must register with the Registrar of the Collective Investment Schemes in terms of section 42 of CISCA. Also see Managing and marketing debt and hedge funds – investment management restrictions.

Provided that private equity funds are not made available to members of the public, the structures under which they operate are not directly regulated by the FSCA.

Generally

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the Collective Investment Schemes Law (CIS) Law and the Close-ended Collective Investment Law and are therefore subject to regulation by the Comisión Nacional del Mercado de Valores (Spanish Securities and Exchange Commission, CNMV).

The CIS Law regulates open-ended collective investment schemes. The Close-ended Collective Investment Law regulates close-ended collective investment entities.

Open-ended collective investment schemes

The CIS Law defines CIS as entities whose corporate purpose is raising funds, assets or rights from the public in order to manage and invest in assets, rights, securities or other instruments, financial or otherwise, provided that the investor's yield is established in accordance with the collective results.

Close-ended collective investment entities

The Close-ended Collective Investment Law defines close-ended collective investment as the investment carried out by venture capital entities and other collective investment entities whose divestment policy fulfils the following requirements:

• such divestments are made simultaneously for all investors; and
• the yield obtained by each investor is in accordance with the rights which correspond to each investor, according to the terms set forth in the by-laws or regulations of the entity for each class of shares or units.

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities mainly under the Securities Market Act 2007 (Lag (2007:528) om värdepappersmarknaden) and Alternative Investment Fund Managers Act 2013 (Lag om förvaltare av alternativa investeringsfonder (2013:561)) and therefore subject to regulation by the Swedish Financial Supervisory Authority (Finansinspektionen or SFSA).

Authorization from the SFSA is required in order to establish a fund. Authorization requires, inter alia, that the fund is established by a limited company incorporated in Sweden, that there are reasons to believe that the fund will be managed in accordance with the Securities Market Act 2007 and that the managers of the fund are considered suitable.

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the Securities and Exchange Act B.E. 2535 (1992) (SEA) and therefore subject to regulation by the SEC and the SET.

The mutual fund for Institutional Investors and Ultra High Net Worth (UHNW) Investors under the supervision of the SEC are similar in nature to hedge funds (eg no investment restrictions on the type of financial assets, no ratio requirements on investment).  The mutual fund set up for this investment purpose must not be a retirement mutual fund, ETF fund or long term equity fund.

Investment made by mutual funds must comply with the governing rules and investment policy specified in the prospectus. The investment policy must be risk diverse in terms of assets, industrial sector and in line with investment restrictions, if any.

For the purposes of the above:

• 'Institutional Investors' means specific institutional investors, e.g. finance companies, securities companies, insurance companies and mutual funds.
• 'UHNW Investors' means a juristic person or a natural person having shareholdings or investments in securities or derivatives contracts reaching the amount specified by the SEC, as follows:
  • for a juristic person UHNW – shareholders' equity of at least THB200 million, or direct investment in securities of at least THB40 million or at least THB80 million (including deposits) based on the latest audited financial statements; and
  • for a natural person UHNW – net assets of at least THB70 million (excluding main residence), annual income of at least THB10 million or THB7 million (excluding spouse's income), or funds for direct investment in securities of at least THB25 million or at least THB50 million (including deposited funds).

The Law of Ukraine ‘On Collective Investment Funds’ dated 5 July 2012 determines the different procedures for establishing corporate and unit funds.

Corporate funds

A corporate investment fund is incorporated as a legal entity. It may be created only by way of establishment (no merger, division or transformation is permitted as a method of creating a fund). Members of governing bodies of such funds, for example the supervisory board and board of directors, have to comply with certain requirements.

A fund shall be established in accordance with the process set out by law. A failure to comply with the pre-determined stages may give grounds for the Security Commission to refuse to grant a registration certificate for a corporate fund's shares or to register a fund's rules.

Unit funds

A unit investment fund does not have legal entity status under Ukrainian law. Such funds are established and operated by asset management companies.

Asset management companies are commonly incorporated in the form of limited liability companies or joint-stock companies and are entitled to render asset management services to institutional investors only after having obtained a license from the National Securities and Stock Market Commission. Members of governing bodies of asset management companies have to comply with certain requirements.

Generally

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the Financial Services and Markets Act 2000 and therefore subject to regulation by the UK Financial Conduct Authority.

Collective Investment Schemes

The regulations apply to activities undertaken in relation to 'Collective Investment Schemes' which are schemes comprising the following arrangements (subject to certain specific exceptions set out in the legislation):

• with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income;
• where the participants do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions; and
• that have either or both of the following characteristics:
  • pooling of investors' contributions and profits or income; and
  • the property is managed as a whole by or on behalf of the operator of the scheme.

Generally

Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the Financial Services and Markets Act 2000 and therefore subject to regulation by the UK Financial Conduct Authority.

Collective Investment Schemes

The regulations apply to activities undertaken in relation to ‘Collective Investment Schemes’ which are schemes comprising the following arrangements (subject to certain specific exceptions set out in the legislation):

• with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income;
• where the participants do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions; and
• that have either or both of the following characteristics:
  • pooling of investors' contributions and profits or income; and
  • the property is managed as a whole by or on behalf of the operator of the scheme. 

Onshore UAE

The federal securities regulatory authority of the UAE is the Emirates Securities and Commodities Authority (SCA), which is responsible for regulating the rules applicable to the incorporation and establishment of domestic funds as well as the promotion and marketing of foreign funds, in the UAE.

Generally speaking, under the relevant regulations (notably SCA Board Decision No.3 of 2017 regarding the Promotion and Introduction Regulations (PIRs)), the promotion of financial products to persons in the UAE requires a SCA license for which an onshore UAE business presence is required. Any person introducing UAE investors to a service provider in order to receive financial services, including trading services, needs to get the SCA's approval. However, neither the SCA license nor the SCA approval requirements apply when an exclusion is available. For example, promoting to, or introducing, institutional investors and licensed financial institutions, or government bodies and entities owned by them are excluded as is acting on the basis of a reverse solicitation. Promoting or introducing in relation to UAE retail or high net worth individuals is not permitted without the relevant license/approval. Finally, while licensed promoters need only notify the SCA of any promotions they make in the UAE, promoters proposing to market foreign funds in the UAE must obtain the SCA's prior approval.

 These requirements also apply to firms located in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global market (ADGM) when they wish to approach retail or high net worth individuals who are located in the UAE.

DIFC

In the DIFC, the Dubai Financial Services Authority (DFSA) is the relevant regulatory authority that oversees funds established and marketed in the DIFC. Similarly with the position onshore in the UAE, various licencing requirements must be met before a fund can be established and promoted in the DIFC. For example, depending on the type of fund there may be requirements to register the fund with the DFSA or notify the DFSA of the fund's activity, as well as certain licencing requirements that fund managers operating in the DIFC must meet. 

A US investment vehicle that is deemed an 'investment company' under US law and cannot rely on an exception or exemption from registration will generally be required to:

• register with the US Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (ICA); and
• register its public offerings under the Securities Act of 1933 (Securities Act).

If registration is required, the investment company will be subject to various requirements and restrictions, including significant limitations on the ability of the investment company to make carried interest/performance fee payments to its investment manager.

Private investment funds, including hedge funds and debt funds, generally rely on the exceptions to the registration requirement set forth in Sections 3(c)(1) and 3(c)(7) of the ICA.

Section 3(c)(1)

Section 3(c)(1) of the ICA excepts any issuer whose outstanding securities (not including short-term paper) are beneficially owned by 100 persons or fewer and that is not making (and does not propose to make) a public offering of such securities. Where an entity holds more than 10% of the outstanding securities, the numerical cap on investors includes a 'look-through' to the ultimate owners of that entity. In practice, look-through determinations often require a complex law and fact analysis.

Pursuant to Securities Act requirements, an issuer availing itself of the section 3(c)(1) exception can raise an unlimited amount of capital, but all the investors must be sophisticated, and no more than 35 can be sophisticated without also being 'accredited investors.' If a general solicitation for investment is made, all investors must be 'accredited investors.'

Section 3(c)(7)

Section 3(c)(7) of the ICA excepts any issuer whose outstanding securities are owned exclusively by persons who, at the time of acquisition of such securities, are 'qualified purchasers' and that is not making (and does not propose to make) a public offering of such securities. Unlike the section 3(c)(1) exception, the Securities Act does not limit the number of investors, but private funds relying on the section 3(c)(7) exception generally cap investors at 1,999 (or less) in order to avoid registration requirements under the Securities Exchange Act of 1934.

A fund sponsor may be required to register as an Investment Adviser under the Investment Advisers Act of 1940.