Regulation

The staff of the U.S. Securities and Exchange Commission reviewed the original Hub & Spoke structure and concluded that “the organization of mutual funds in hub-and-spoke arrangements is an important evolution in the mutual fund industry.” With respect to the Global Hub & Spoke System the underlying general legal, fiscal and regulatory issues were presented to the relevant authorities in the U.S., UK, Luxembourg and Ireland. The authorities in the UK, Luxembourg and Ireland confirmed that funds organized in those jurisdictions and operating as UCITS could participate in the structure. In addition, in the context of the adoption of UCITS IV the EU’s directorate-general for the internal market and services noted that “virtual pooling structures are not prohibited by the UCITS Directive.” GFX believes that the issues raised in the U.S. have also been adequately addressed. However, as with other fund systems or structures – including conventional ones – no assurance can be given that, in the context of any specific application or filing, additional issues may not arise which would lead the applicable regulatory or fiscal authority to deny, reject or significantly modify that application or filing.