This tool offers you the chance to see how jurisdictions compare for finance and investment around the world. Please select your country and legal topic area(s) of interest using the drop down menu on the left hand side of the page.

Establishing and investing in debt / hedge funds

Are there any other notable risks or issues around establishing and investing in funds?

Angola

Angola

No.

Last modified 23 Jul 2020

Australia

Australia

Establishing funds

As noted above, in order to establish a fund in Australia, the operator of the fund must usually hold an AFSL (or be an authorized representative of an AFSL holder) with appropriate license authorizations.

In addition, where the fund is a managed investment scheme (which is usually the case for retail funds), a Responsible Entity must be appointed. In order for an entity to act as a Responsible Entity, it must:

  • be an Australian public company;
  • hold an AFSL (or be an authorized representative of another AFSL holder) authorizing it to provide the various financial services relevant to the operation of the fund; and
  • either have a majority of directors who are external directors or have a compliance committee (to oversee the retail fund's compliance requirements) with a majority of 'external members'.

It is common for investment managers who do not satisfy the requirements for being a Responsible Entity to enter into an arrangement with an external or 'professional' Responsible Entity, which will operate the fund according to the investment strategy which the investment manager may set.

As mentioned, managed investment schemes may also qualify for tax concessions if they qualify as a “managed investment trust” under Australian tax laws. For a wholesale unit trust fund to qualify as a “managed investment trust”, the trust must be operated or managed by an AFSL licensee or by an authorised representative of such licensee.

Investing in funds

As noted above, most investment funds in Australia are structured as unit trusts. These funds are subject to the general law of trust. In addition, usually:

  • The investors in a fund have no power to influence the fund's investment strategy, or any of the decisions or operations of the fund, solely by virtue of being a unit holder.
  • The investors in the fund do not have a specific right to any particular assets of the trust.
  • The investors in the fund will rank behind the fund's creditors in the event of insolvency.
  • The fund operator will usually be entitled to an indemnity from the assets of the fund for any liabilities it may incur in performing its duties, and will usually limit its liability to the amount by which it is actually indemnified.

Last modified 3 Dec 2019

Belgium

Belgium

N/A

Last modified 18 Dec 2019

Brazil

Brazil

Establishing funds

In order for a fund to be established in Brazil it has to comply with the applicable rules of and be registered with the Brazilian Securities Commission (CVM). In accordance with the applicable regulation, the fund must have a manager and an independent accounting firm. The manager must be a Brazilian entity authorized by CVM for the performance of professional management of securities portfolios, in accordance with Article 23 of Law No. 6.385.

Investing in funds

Prospectuses for funds that are offered to the public in general must specify risk factors applicable to that type of investment.

Last modified 4 Dec 2019 | Authored by Campos Mello Advogados

Canada

Canada

Establishing funds

Managing investments is a regulated activity in Canada, and dealers and financial advisors must be registered with the applicable securities commission. Similarly, individuals acting on behalf of registered firms must also be registered under the applicable category.

Investing in funds

Investment in funds is subject to generally the same risks as investment in any other security.

Last modified 2 Jan 2020

Chile

Chile

Fund management is a regulated and supervised activity and therefore subject to reporting requirements, depending on the type of fund managed.

Last modified 6 Dec 2019 | Authored by BAZ|DLA Piper

Colombia

Colombia

Establishing funds

The incorporation of private equity funds (PEFs) is not subject to the authorization of the Superintendency of Finance. Nonetheless, the management company of the PEF must deliver certain documents to the Superintendency of Finance at least 15 business days before the final closing date of the fund. Additionally, the placement terms of the PEF may establish that the investment decisions of the fund may be delegated to a general partner, whom must credit at least five years of experience in the administration of private equity assets to the PEF be deemed as an eligible investment for local pension fund managers and insurance companies.

Last modified 20 Oct 2017 | Authored by DLA Piper Martinez Beltrán

Czech Republic

Czech Republic

Establishing funds

The only other issue is the requirement that the fund must be registered with the Czech National Bank.

Investing in funds

Unlike bank deposits, the main risk regarding investing in funds is that they are not insured.

Last modified 20 Oct 2017

Finland

Finland

Establishing funds

It can be noted that as a main rule, the fund documentation shall be drafted in Finnish or Swedish if no other language is approved by FIN-FSA, when the fund is marketed to non-professional investors.

Last modified 26 Nov 2019

France

France

Establishing funds

Managing investments is a regulated activity under French law and therefore subject to authorization. Certain investment vehicles which do not fall within any of the categories of alternative investment fund (AIF) under the Monetary and Financial Code (Code monétaire et financier) may nevertheless be subject to regulatory obligations if they fall within the definition of AIF as defined in the Alternative Investment Fund Managers Directive.

Last modified 4 Dec 2019

Germany

Germany

Establishing funds

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

Managing investments is a regulated activity under the KAGB and therefore subject to authorization – pursuant to Section 339 KAGB providing the services of a fund manager without being authorized is a criminal offence punishable by imprisonment of up to five years.

Last modified 20 Oct 2017

Ghana

Ghana

The Securities and Exchange Commission has published a circular indicating permissible investments for fund managers. 

Permissible capital markets instruments include local equity (listed and unlisted); foreign equity (listed); local bonds (listed and unlisted); foreign bonds (listed); preference shares; venture funds; mutual funds and unit trusts; notes (more than one year); others (as may be permitted by law). 

Permitted money market instruments include fixed deposits issued by financial institutions regulated under the banking legislation; commercial paper issued pursuant to the Securities Exchange Commission’s Guidelines and treasury bills. 

There are also provisions under the pensions legislation and guidelines issued by the National Pensions Regulatory Authority which prescribe the classes of assets permitted for pension fund investments as well as limits for different classes of assets and prohibitions on certain types of investments and transactions by pension funds.

Last modified 15 Jan 2020 | Authored by Reindorf Chambers

Hungary

Hungary

Establishing funds

There are no other specific issues to mention here for the purposes of this site.

Investing in funds

There are no other specific issues to mention here for the purposes of this site.

Last modified 20 Oct 2017

Ireland

Ireland

Irish investment funds may be open-ended, open-ended with limited liquidity or closed-ended. Accordingly, the risks/issues that arise around establishing or investing in a fund will largely depend on the structure of the fund and its underlying fund documents. Certain notable risks/issues are considered below.

Making investments

The agreement between the fund and the investor in relation to subscription is typically enshrined in a subscription or capital call agreement. This tends to be a relatively short document, which needs to be read in conjunction with the constitutional documents underpinning the fund structure and the documents governing the service provider arrangements.

In many cases, it is the fund, acting through its directors, that will be authorized to make the calls on investors.A,lternatively this role can be delegated to either the relevant investment manager or the administrator. For funds that are structured as Unit Trusts or CCFs, which are constituted by deed between the manager and the trustee/ depositary, it is usually the manager who is authorized to make the calls.

It is important to consider the full scope of fund documentation and the impact this may have on, for example, redemptions. In the context of a capital call facility (in the case of closed-ended funds or limited liquidity funds with a capital commitment structure), for example, it would also be important to understand: (i) the subscription process, including who can make calls on investors and when capital calls can be made; (ii) who determines the price at which units or shares are issued and by what means; (iii) what an investor can be asked to fund; (iv) the implications of an investor not meeting a capital call; and (v) the relevant account into which subscription funds must be paid. Any of these matters could result in risks for an investor, particularly if the obligations to fund are more onerous than expected or don’t align with any back-to-back funding arrangements an investor might have in place to meet such calls.

Managing investments

For Irish domiciled funds, the general rule is that any entity with discretionary asset management capacity, whether an investment manager or a delegate thereof such as a portfolio manager, must be approved in advance by the Central Bank of Ireland. Accordingly, issues may arise with regards to this approval process for any new entrants. There will also be ongoing compliance aspects to comply with once authorized. For example, an investment manager cleared to act for an Irish authorized fund should inform the Central Bank of Ireland in advance of any upcoming changes to its regulatory status, its name or registered address.

Last modified 16 Jul 2020

Italy

Italy

Establishing funds

As anticipated, the establishment, marketing and management of Italian investment funds (having either contractual or corporate form) represent activities exclusively reserved to duly licensed entities and subject to authorization requirements and ongoing supervision. Such activities, as a consequence, are to be performed in compliance with all the relevant applicable rules and regulations. Every potential breach or evasion (eg 'ghost companies') of the aforesaid rules and regulations may trigger the application of administrative and criminal sanctions associated to an unlawful exercise of financial activity or to the violations of the applicable regulatory provisions.

Investing in funds

No specific issue arises. Any specific risk and the overall risk profile connected with any investment in a fund is mandatorily disclosed in the fund’s offering and subscription documentation.

Last modified 22 Jan 2020

Ivory Coast

Ivory Coast

Investment management is a regulated activity and entities wishing to conduct such an activity are to be authorized by the CREPMF.

Risks and issues are of different types:

Currency or Foreign exchange risk: investments in securities may be made in different currencies. The rates of currencies may change and the value of a fund’s investment be affected. Investments in a foreign market may entail exchange of currencies where an investor may have to exchange a domestic currency into a foreign currency, at an actual exchange rate, and convert it back into his domestic currency. Such conversion transactions may constitute risks that need to be mitigated.

Liquidity risk is the risk of the impossibility to sell a financial instrument at a certain point of time.

Diversification risk: investors may be exposed to risks when they invest in only one asset class or in a very limited number of assets. Such restrictive investments do not help in mitigating the risks inherent to the lack of diversification on such investments.

Solvency risk: borrowers may be unable to meet their commitments and creditors may lose their claims.

Political risk: this type of risk is associated with a political situation where authorities change their tax systems, the ability to repatriate capital and the like.

Risks and issues are to be nuanced as there are substantial protections such as the one provided for by the CREPMF acting as a regulatory agency entrusted with the protection of household savings invested in securities or any other type of investment through public offerings within the WAMU.

Further protection is provided, for instance, under Article 15.3 (Instruction N. 45 / 2011 of the CREPMF) and requires that UCITS' assets be kept by a single depository, distinct from the UCITS management company.

National and Sub-Regional Legislations recognize the segregation of the assets of the Depositary's UCITS Clients from the sub-custodian’s own assets.

Those assets are, in some way, protected through entities like the deposit guarantee fund (Fonds de Garantie des Dépôts, the FGD-UMOA) in the WAMU.

The FGD-UMOA's mission is to provide deposit guarantees for customers of credit institutions and decentralized financial systems (DFS), approved in the WAMU.

As such, it is responsible for the compensation of depositors in the event of unavailability of their assets, within a limit defined by the Council of Ministers of the WAMU.

Last modified 3 Aug 2020

Japan

Japan

Establishing funds

The general partner (GP) of a fund is also subject to certain conduct restrictions and obligations including the following:

  • a prohibition on the provision of fraudulent information in connection with the solicitation or sale of financial instruments;
  • a prohibition on the indemnification of its customers against losses incurred as a result of the investment;
  • a prohibition on licensing any third party to use the GP's name or conduct the GP's business operations;
  • a prohibition on providing a definitive judgement on the investment;
  • certain advertising restrictions;
  • disclosure obligations before and upon the sale of financial instruments;
  • a duty of care and loyalty to its customers;
  • a duty to conduct solicitation and sales activities in accordance with the customer's investment skills, history, purpose, and financial status;
  • a prohibition on soliciting and selling fund interests to investors where a segregation of the invested capital is not secured;
  • a duty of good care in investment management; and
  • a duty to provide a written investment report to customers.

Some of the requirements above may not apply when engaging with professional investors.

Last modified 5 Dec 2019

Luxembourg

Luxembourg

Establishing funds

 

Managing investment funds is a regulated activity and therefore subject to authorization and supervision of the Commission de Surveillance du Secteur Financier. The establishment of investment funds such as undertakings for collective investments in transferable securities, undertakings for collective investments pursuant to part II of the Luxembourg law of 17 December 2010, specialised investment funds and companies investing in risk capital are always subject to the authorization and supervision of the Commission de Surveillance du Secteur Financier.

Last modified 10 Dec 2019

Mauritius

Mauritius

Typically, funds are managed by a fund manager, who has the discretion to acquire or dispose of assets using the investor funds in line with a pre-determined investment strategy and subject to safeguards set out in the constitutive documents of the fund and also set out in a fund management agreement. 

Fund management requires a license under the Securities Act 2005.

Last modified 6 Dec 2019 | Authored by Juristconsult Chambers

Mexico

Mexico

Establishing funds

The only legal structure used in Mexico to set up a fund is a stock corporation (Sociedad Anónima or SA). The Investment Funds Law was amended in 2014 to permit the establishment of a special type of SA for mutual funds, so that mutual funds are now required to comply with fewer regulatory requirements.

Last modified 5 Dec 2019

Morocco

Morocco

Managing investments is a regulated activity under Moroccan law and there subject to AMMC authorization.

Last modified 6 Jan 2020

Netherlands

Netherlands

There are no specific risks to highlight here, other than the general regulatory framework that applies.

Last modified 6 Dec 2019

New Zealand

New Zealand

Establishing funds

Funds that are offered to retail investors must comply with a range of compliance obligations in the Financial Markets Conduct Act 2013 (FMCA), including having a licensed manager and licensed supervisor.

Currently discretionary investment management service (DIMS) providers must be either authorized under the Financial Advisors Act 2008 (FAA) or licensed under the FMCA. From 29 June 2020 all DIMS providers will need to be licensed under the FMCA.

Last modified 13 Dec 2019

Norway

Norway

Establishing funds

In general, the legal framework for establishing fund structures is complex and there are many risks to be taken into account.

A new entrant to the fund market will need to obtain the necessary license(s) from the regulator and set up an organization (incl. control bodies) which fulfils various suitability requirements. It will also have to manage the fund in compliance with the applicable regulations. The marketing and distribution of fund products to the public are subject to particular rules (for more information, see Establishing and investing in debt and hedge funds – establishment). It is also important for the fund incorporator to select the optimal fund structure to fit the fund product(s) intended for sale and the targeted fund investors.

For investors there are a lot of risk factors to take into consideration and an investment fund can generally reduce the risk of being exposed to a single security as it allows them to invest in a portfolio of securities, meaning a drop in the value of a single investment will not necessarily cause the value of the whole investment to collapse. That being said, all investments carry a varying degree of risk and investing in funds involves many of the same risks as any other investment. The value of an investment may rise or fall and the previous performance of a fund is not a guarantee of its future performance. Further, return and risk almost always go hand in hand; generally, an investor must take a greater risk to achieve greater returns. The risks that apply will often be determined by the classes of assets that the fund invests in and the selection of investments that the manager makes. Other risk factors that may impact on the performance of a fund include market risk, regulatory, economic and political risks (especially if the fund invests in non-EU markets, emerging markets etc), counterparty risk (if a counterparty defaults, that may impact on the fund's position), currency risk and gearing risks (if the fund borrows or utilizes derivatives to increase potential returns), diversification risk and liquidity risk. Liquidity risk is the risk that positions cannot be realized at a particular point in time both in relation to the manager's ability to buy and sell positions for the fund and the investor's ability to buy or sell units in the fund. The fund investor should carefully consider the fund's risk profile and the policies employed by the fund. Note that all risk indicators are usually based on historical data or assumptions.

Last modified 20 Oct 2017

Poland

Poland

Establishing funds

Managing investment funds is a regulated activity under the Act on Investment Funds and is therefore subject to authorization by the Polish Financial Supervisory Authority.

Last modified 6 Dec 2019

Portugal

Portugal

There are no other notable risks or issues to reference here for the purposes of this site. Possible additional risks would better be assessed on a case by case basis.

Last modified 6 Dec 2019

Puerto Rico

Puerto Rico

Establishing funds

Separately managed accounts are also commonly used in Puerto Rico as an investment management structure. This is where investor funds are generally held in a separate account subject to the discretionary investment authority of a manager who can acquire and dispose of assets using the investor funds in line with a pre-determined strategy and parameters set out in an Investment Management Agreement. These are often structured as common trust funds, variable annuities and individual retirement accounts.

Managing investments is a regulated activity under the Uniform Securities Act and the US investment Advisors Act of 1940 and therefore subject to authorization.

Investing in funds

Most investment funds established in Puerto Rico are created for tax reasons, and therefore the investor in the fund should be aware that the tax treatment of the investment and of the fund itself is in tune with the investor's objectives.

Last modified 11 Dec 2019

Romania

Romania

There are no specific risks except for the inherent risks corresponding to each type of fund.

Last modified 20 Oct 2017

Russia

Russia

Establishing funds

Establishing a fund requires a special license (for the fund itself in case of a joint-stock company investment fund or its management company in case of a mutual fund), meeting license rules and complying with certain reporting and public disclosure requirements throughout the operation of the fund. For more information, see Establishing and investing in debt and hedge funds – establishment.

Investing in funds

Before investing in a fund, it is essential to check for specific requirements which may apply to investment in the fund by virtue of law or in accordance with rules of the specific fund, for instance to verify whether investment units are designated for qualified investors only or may be offered to general public.

Last modified 5 Dec 2019

Senegal

Senegal

Investment management is a regulated activity and entities wishing to conduct such an activity are to be authorized by the CREPMF.

Risks and issues are of different types:

  • Currency or Foreign exchange risk: investments in securities may be made in different currencies. The rates of currencies may change, and the value of a fund’s investment be affected. Investments in a foreign market may entail exchange of currencies where an investor may have to exchange a domestic currency into a foreign currency, at an actual exchange rate, and convert it back into a domestic currency. Such conversion transactions may constitute risks that need to be mitigated.
  • Liquidity risk is the risk of the impossibility to sell a financial instrument at a certain point of time.
  • Diversification risk: investors may be exposed to risks when they invest in only one asset class or in a very limited number of assets. Such restrictive investments do not help in mitigating the risks inherent to the lack of diversification on such investments.
  • Solvency risk: borrowers may be unable to meet their commitments and creditors may lose their claims.
  • Political risk: this type of risk is associated with a political situation where authorities change their systems, such as the tax system(s), the ability to repatriate capital and the like.

Risks and issues are to be nuanced as there are substantial protections such as those provided for by the CREPMF acting as a regulatory agency entrusted with the protection of household savings invested in securities or any other type of investment through public offerings within the WAMU.

Further protection is provided, for instance, under Article 15.3 (Instruction N. 45 / 2011 of the CREPMF) and requires UCITS' assets be kept by a single depository, distinct from the UCITS management company.

National and Sub-Regional Legislations recognize the segregation of the Depositary's UCITS Clients’ assets from the sub-custodian’s own assets.

Those assets are, in some way, protected through entities like the deposit guarantee fund (Fonds de Garantie des Dépôts, the FGD-UMOA) in the WAMU.

The FGD-UMOA's mission is to provide deposit guarantees for customers of credit institutions and decentralized financial systems (DFS), approved in the WAMU.

As such, it is responsible for the compensation of depositors in the event of unavailability of their assets, within a limit defined by the Council of Ministers of the WAMU.

Last modified 29 Jul 2020

Singapore

Singapore

There are none to highlight for the summary purposes of this site.

Last modified 20 Oct 2017

Slovak Republic

Slovak Republic

Establishing funds

Establishment and operation of a fund, except for a Qualified Investors Fund, is a regulated activity under the Act on Collective Investment rules and is subject to licensing and supervision by the National Bank of Slovakia.

Investing in funds

No specific issues.

Last modified 6 Dec 2019

Sweden

Sweden

Establishing funds

Separately managed accounts are also commonly used in Sweden as an investment management structure; investor funds are generally held in a separate account subject to the discretionary investment authority of a manager who can acquire and dispose of assets using the investor funds in line with a pre-determined strategy and parameters set out in an Investment Management Agreement. These are often also structured as 'funds of one'.

Managing investments is a regulated activity under the Swedish Financial Supervisory Authority's (Finansinspektionens) rules and therefore subject to authorization; however, managed accounts and 'funds of one' themselves are generally not classed as (and therefore avoid the regulatory restrictions in being classed as) Collective Investment Schemes or Alternative Investment Funds.

Last modified 22 Jan 2020

Thailand

Thailand

Establishing funds

Risk can emanate from a fund manager's failure to comply with laws, rules, regulations, prescribed practices, internal policies, procedures or prospectus rules approved by the SEC.

For property funds or Real Estate Investment Trusts, foreign investment limits will apply. Not more than 49% of all purchased investment units can be held by foreign investors. In addition, the SEC also requires the registrar to oversee the ratio of foreign investment units and to reject any transfer of units resulting in the violation of foreign investment limits.

Investing in funds

Apart from usual commercial risks, there are no notable risks associated specifically with investing in funds in Thailand.

Last modified 4 Apr 2020

Ukraine

Ukraine

Establishing funds

Investment funds are generally held in separate accounts subject to the discretionary authority of the fund manager who shall acquire and dispose of assets using the funds in accordance with a pre-determined strategy set out in a management agreement entered into between the fund and the fund manager.

Managing investments is a regulated activity under Ukrainian law, therefore asset management companies are subject to authorization from the National Securities and Stock Market Commission.

Last modified 24 Jan 2020

UK - England and Wales

UK - England and Wales

Establishing funds

Separately managed accounts are also commonly used in the UK as an investment management structure – investor funds are generally held in a separate account subject to the discretionary investment authority of a manager who can acquire and dispose of assets using the investor funds in line with a pre-determined strategy and parameters set out in an Investment Management Agreement. These are often also structured as 'funds of one' in a separate vehicle.

Managing investments is a regulated activity under the UK Financial Conduct Authority rules and therefore subject to authorization; however managed accounts and 'funds of one' themselves are generally not classed as (and therefore avoid the regulatory restrictions in being classed as) Collective Investment Schemes or Alternative Investment Funds.

Last modified 6 Dec 2019

UK - Scotland

UK - Scotland

Establishing funds

Separately managed accounts are also commonly used in the UK as an investment management structure – investor funds are generally held in a separate account subject to the discretionary investment authority of a manager who can acquire and dispose of assets using the investor funds in line with a pre-determined strategy and parameters set out in an Investment Management Agreement. These are often also structured as 'funds of one'.

Managing investments is a regulated activity under the UK Financial Conduct Authority rules and therefore subject to authorization; however, managed accounts and 'funds of one' themselves are generally not classed as (and therefore avoid the regulatory restrictions in being classed as) Collective Investment Schemes or Alternative Investment Funds.

Last modified 20 Oct 2017

United Arab Emirates

United Arab Emirates

In certain respects, the legal and regulatory framework in the UAE (both onshore UAE and the Dubai International Financial Centre (DIFC)) is still developing for the funds market (and is therefore viewed as an emerging market). Accordingly, there may be certain additional risks for investors in terms of enforceability of obligations and/or the ability to exercise certain rights. However, this will ultimately depend of the nature of the fund and careful consideration will need to be made as to the appropriate risk factors to be included in the prospectus or offering document in this regard.

Before making an investment decision, prospective investors in funds should always consider carefully – in the light of their own financial circumstances and investment objectives – all of the information in the prospectus (and consult their own financial, tax, legal and other professional advisors regarding the suitability of any debt security).

Last modified 23 Jan 2020

United States

United States

Establishing funds

A US fund deemed to be an 'investment company' must register with the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (ICA) unless an exemption from registration is available. Failure to register when required may carry significant civil and criminal penalties for fund sponsors. In addition, an entity that provides investment advisory or management services to a fund may be required, depending on its aggregate assets under management (AUM), to register with the SEC as an Investment Adviser under the Investment Advisers Act of 1940 (IAA) or with its state securities regulator. The manager of a fund that is not required to register under the ICA may nevertheless be required to register under the IAA.

Prior to accepting investors, the fund must comply with applicable KYC and anti-money laundering rules as well as US tax rules (in particular the Foreign Account Tax Compliance Act), which may require obtaining identification information from potential investors.

In addition, the fund must confirm whether or not potential investors are subject to the Employee Retirement Income Security Act (ERISA), as the presence of such investors in the fund may cause the entire fund to be subject to ERISA’s fiduciary duty rules and other restrictions. The fund and/or its management may also be required to register with the US Commodity Futures Trading Commission under the Commodity Exchange Act or apply for an exemption from registration.

Investing in funds

Potential investors in funds should note the following provisions of the fund’s governing documents in the first instance:

  • when and under what circumstances investors may be required to indemnify the fund’s management or personnel for losses they incur related to the fund, or to return distributions previously made by the fund;
  • what rights investors have to remove the fund’s management;
  • in closed-end funds, the priority of payments for distributable funds (the 'waterfall'), and the portion of such payments to be made as carried interest to the fund sponsor;
  • in open-end funds, the methodology of computing performance compensation for the fund sponsor;
  • the amount and timing of management fees payable to the fund sponsor;
  • in open-end funds, when the investor may redeem/exit the fund;
  • the circumstances in which an investor may transfer its interest; and
  • the form and jurisdiction of the fund for tax purposes.

Last modified 24 Jan 2020

Are there any restrictions on issuing debt securities?

No.

What are common issuing methods and types of debt securities?

The most common type of debt securities in Angola is the issuance of commercial paper. Commercial paper is debt securities with a maturity of one year or less. Commercial companies, public companies, civil companies in commercial form and other legal persons governed by public or private law may issue commercial paper.

Among other requirements, the issue of commercial paper requires prior legal certification of accounts or auditing by an auditor registered with the Capital Market Commission (CMC).

What are the differences between offering debt securities to institutional / professional or other investors?

  • Agreements for investment services concluded with non-institutional investors shall be in writing and only such investors may invoke invalidity resulting from failure to comply with the form.
  • In intermediation agreements signed with non-institutional investors for the execution of operations in Angola, the possible application of foreign law may not have the consequence of depriving the investor of the protection ensured by the Angolan Securities Code provisions on information, conflict of interest and asset segregation.
  • Brokers must establish, in writing, an internal policy that allows them, always, to know the nature of each client, as a non-institutional or institutional investor, and to adopt the necessary procedures for its implementation.
  • The Broker's information duties to non-institutional investors are far more extensive than to institutional investors.

Assessment of the Adequate Character of the Operation:

In the case of non-institutional investors, the broker must ask the client for information regarding their knowledge and investment experience with regard to the type of security and derivative instrument or the service considered, to enable them to assess whether the client understands the risks involved.

If the broker considers that the transaction under consideration is not suitable for that client, they should advise the client in writing.

In the case of institutional investors, the broker may assume that, in respect of securities and derivatives, operations and investment services, the client has the necessary level of experience and knowledge to assess the appropriateness of the operation.

  • Public Offers:

An offer addressed to at least 150 people who are non-institutional investors resident or established in Angola is qualified as public.

When is it necessary to prepare a prospectus?

The general rule is that any public offer of securities must be preceded by the disclosure of a prospectus.

The exceptions to this rule are:

  • public offers of securities to be awarded, on the occasion of a merger, to at least 150 shareholders other than institutional investors, provided that a document containing information considered by the CMC to be equivalent to that of a prospectus is available at least 15 days before the date of the General Meeting;
  • the payment of dividends in the form of shares of the same class as the shares in respect of which the dividends are paid, provided that a document is available containing information on the number and nature of the shares and the reasons for and details of the offer;
  • public offers for distribution of securities to existing or former directors or employees by their employer where the employer has securities admitted to trading on a regulated market or by a company controlled by it, provided that a document is available containing information on the number and nature of the securities and the reasons for and details of the offer; and
  • public offers for sale of securities admitted to trading on a regulated market, provided that the admission prospectus is up to date.

What are the main exchanges available?

BODIVA – Angolan Debt and Stock Exchange

Is there a private placement market?

No.

Are there any other notable risks or issues around issuing or investing in debt securities?

No.

Are there any restrictions on establishing a fund?

No.

What are common fund structures?

Securities investment funds

Real Estate investment funds

Venture Capital investment funds

What are the differences between offering fund securities to professional / institutional or other investors?

Investment funds may be set up exclusively for institutional investors. In that case the Fund rules shall be explicit about the exclusive participation of institutional investors. A Fund intended exclusively for institutional investors may establish different rules compared to other funds, in particular establishing different time limits for ascertaining the value of the unit and payment of redemption, charge a management fee on the basis of the results of the Fund or dispense with the preparation of a half-yearly report.

Are there any other notable risks or issues around establishing and investing in funds?

No.

Are there any restrictions on marketing a fund?

The establishment of an investment fund is subject to prior authorization by the CMC.

Authorization requires approval by the CMC of the incorporation documents, the choice of depositary and the management entity's request to manage the Fund.

Are there any restrictions on managing a fund?

The management of Investment Funds may only be exercised by fund management entities empowered by law and registered with the CMC.

Fund management entities must maintain their business organization equipped with the human, material and technical resources necessary to provide their services under appropriate conditions of quality, professionalism and efficiency, in order to avoid wrong procedures.

Real Estate Fund Management entities must also maintain a technical department qualified to provide real estate project analysis and monitoring services or to contract such services externally.

Are there any restrictions on entering into derivatives contracts?

No.

What are common types of derivatives?

  • Swaps
  • Options
  • Futures

Are there any other notable risks or issues around entering into derivatives contracts?

No.

Luís Filipe Carvalho

Luís Filipe Carvalho

Partner
DLA Piper Africa, Angola (ADCA)
[email protected]
T +244 926 612 525
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