12 Dec 2017

MiFID II will apply from 3 January 2018. One of the areas that is particularly relevant to AREF member funds that are Non UCITS Retail Schemes (NURS) is whether such funds should be regarded as “complex” or “non-complex”.
In a Q&A in June, the EU regulator, ESMA, implied that NURS should always be regarded as complex, whereas the FCA in the UK has taken the position that treatment of a NURS will depend upon its specific  characteristics, stating “Our view of the MiFID II provisions on complex and non complex financial instruments is that, as in MiFID, Non UCITS Retail Schemes (NURS) and investment trusts are neither automatically non complex nor automatically complex. They need to be assessed against the criteria in the MiFID II delegated regulation. When firms apply these criteria, they should adopt a cautious approach if there is any doubt as to whether a financial instrument is non complex.”
The tests to be applied in determining whether an investment in a fund is non-complex instrument are set out in Article 57 of the delegated regulation. The most subjective of the tests is the final one, "adequately comprehensive information on its characteristics is publicly available and is likely to be readily understood so as to enable the average retail client to make an informed judgment as to whether to enter into a
transaction in that instrument.”
We understand that most managers of AREF member funds are taking the view that they are non-complex. In view of the FCA comments on adopting a cautious approach where there is doubt, we would encourage managers to review the publicly available information for their retail clients.


John Forbes

John Forbes

Independent Consultant, John Forbes Consulting

John Forbes is an independent consultant advising real estate investment managers, investors and others in the real estate industry in the rapidly changing areas of product development, governance and regulatory matters for real estate funds.  He has advised on the restructuring of high profile open and closed-ended real estate funds in the UK and elsewhere in Europe, as well as the establishment of new funds. He has advised service providers to the real estate investment management industry on the strategic implications of regulatory and other changes.  Prior to setting up John Forbes Consulting LLP in 2013, he spent over twenty-five years with PwC, where he led the firm's Real Estate Industry Practice in Europe, the Middle-East and Africa across all of the firm's services to the real estate industry.

 John is the chairman of the Independent Supervisory Board of the UBS Triton Property Fund, independent chair of the Urban Splash Residential Fund and non executive chairman of Ginkgo Advisor UK Limited.