The Structure of Belgian Funds

The law refers to both open-ended and closed-ended investment funds, whether `fonds commun de placement’ (FCPs) which have a contractual form, or the corporate `societe d’investissement’. (A more detailed definition of FCPs is provided in the section on France.)

When formed, these funds have to choose one of seven categories of allowed investments. As individual categories, these include investments in futures and options contracts on commodities, or on securities, stock exchange indexes and currencies. This means that as yet, there is no regulation for a fund investing in all types of futures and options.

A royal decree is required for the provisions of the law relating to domestic futures funds to be implemented and, at the time of writing, there seems to be no particular pressure to get this decree adopted. The decree would provide for the setting-up of managed futures funds, but probably only in the corporate structure in view of the equal protection afforded to creditors under the bankruptcy law, which would apply to companies, but not to other types of fund structure.

Funds which invest in either category of futures and options contract are allowed to hold cash for ancillary purposes and will be able to hold cash and securities as investments in their own right once the royal decree is in place.

Funds will need to have prior approval from the Banking and Financial Commission of the content of their prospectuses and all funds will need to be registered with the commission.

Shares in an open-ended fund may be and shares in a closed-ended fund will have to be listed on one of the four Belgian stock exchanges. The name of a fund will also have to show clearly the type of fund it is, whether open-ended or closed-ended, and which type of investments it can use.

Offshore Futures Funds

Offshore futures funds can apply to the Banking Commission for approval to market in Belgium, since the passing of the royal decree of 23 October 1991. To get the approval, the fund must be authorized in its home jurisdiction by a supervisory authority whose duty it is to ensure the protection of investors.

As with domestic funds, offshore futures funds registering in Belgium must invest either in futures and options contracts on commodities or futures and options contracts on securities—they cannot invest in both. Also, they may have to have a custodian— without one the Banking Commission can refuse approval.

There is limited scope for avoiding the approval procedure through marketing strictly on a private placement basis. The rules defining private as opposed to public offerings have recently been revised and impose very strict limitations on such marketing. Restrictions placed on private offerings of offshore funds extend to all telephone calls and correspondence relating to funds not established in Belgium. Previous client relationships are exempted, as is an operation directed only at banks, public credit institutions and certain other investing institutions approved by the Belgian authorities. In these cases, not only can the fund avoid registration, but the intermediary does not need to be a licensed Belgian intermediary.

Act no. 85 on Mutual Funds of 12 February 1990 regulates open-ended investment funds in Denmark and it restricts such funds to investing in futures only for currency and other purposes associated with hedging against risk. However, closed-ended funds, established using the Danish investment company or limited partnership structures, are not regulated by the Mutual Funds Act. These funds are not subject to any specific investment restrictions or any authorization or licensing requirement and as a result may be used as a vehicle for domestic futures funds.

Prospectus Requirements

If shares in a closed-ended fund are to be marketed to the public, a prospectus complying with detailed contents requirements must be filed with the Commercial and Companies Agency, a regulatory authority under the jurisdiction of the Ministry of Industry.

Marketing will be generally regarded as being to the public if addressed to more than 10 people who are not professional investors, unless the minimum investment is over DKr 300 000.

The prospectus will be published by the Commercial and Companies Agency in its electronic information system, usually within seven to 10 days. After this process, marketing of the fund can start.

Listings on the Copenhagen stock exchange can be arranged for shares in a closed-ended Danish investment company and also, in theory at least, for interests in a closed-ended Danish limited partnership.

Offshore Fund Requirements

Shares in an offshore closed-ended futures fund can be marketed to the public in Denmark as long as they comply with the same requirement to file a prospectus in the Danish language as apply to domestic closed-ended funds.

Registration with the Danish authorities can be avoided if a fund is marketed on a private placement basis. A private offer may take place if shares in a fund are offered only to:

• ‘legal entities whose business it is to trade securities‘ including brokers, banks and institutional investors who hold securities portfolios; and/or
• individual investors who purchase shares in an amount not less than DKr 300 000 (approximately US$ 50 000).

The Danish Act on Prospectuses does not specify a maximum number of professional investors to whom shares may be offered without constituting a public offer. As a rough guide, however, local authorities are not likely to view an offer as public if it is made to a maximum of 40-50 Danish investors, each with a pre-existing client relationship with the offerer, and most of whom are `professional investors‘.

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