Alternative Investment Fund Managers Directive (AIFMD)

European Commission Letter to ESMA on Application of AIFMD Passport

On January 19, ESMA published a letter it has received from the European Commission relating to the application of the EU passport under the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”) to non-EU alternative investment fund managers (“AIFMs”) and alternative investment funds (“AIFs”).

The Commission stated that with regard to the advice on granting the AIFMD passport to managers and funds established in third countries, it agrees that the country-by-country approach adopted by ESMA is correct. It noted that the nature of the test set out in Article 67 of the AIFMD may result in different outcomes depending on the regulatory and supervisory framework of the third countries in which non-EU AIFMs and funds are established.

The Commission stated that it will take a decision [as to whether the AIFM Directive passporting regime should be extended to the management and marketing of AIFs by non-EU AIFMs, and to the marketing of non-EU AIFs by EU AIFMs] when a sufficient number of countries have been appropriately assessed.

The Commission invites ESMA to:

  • Complete, by June 30, 2016, the assessment of the USA, Hong Kong, Singapore, Japan, Canada, Isle of Man, Cayman Islands, Bermuda and Australia.
  • Provide a more detailed assessment of the capacity of supervisory authorities and their track record in ensuring effective enforcements, including in those countries looked at in the first wave of countries.
  • Provide a preliminary assessment of the expected inflow of funds by type and size into the EU from relevant third countries.

The letter concludes with the Commission agreeing with ESMA’s suggestion that it produces another opinion on the functioning of the passport and national private placement regimes once the AIFMD is fully transposed in all member states and there is more experience on the functioning of the framework. (An accompanying press release explains that ESMA suggested it produce another opinion because the delay in implementing the AIFMD, together with the delay in its transposition in some member states, made it difficult for ESMA to provide a definitive assessment by July 2015, the initial legislative deadline).

ESMA’s New Q and A Responses on the Application of AIFMD and Consultation on New Guidelines

The European Securities and Markets Authority (ESMA) has published updated questions and answers on the application of the Alternative Investment Fund Managers Directive (AIFMD), which includes updated and new questions and answers on reporting to national authorities and the calculation of the total value of assets under management (AUM). In the same week, it has launched a consultation on proposed guidelines on sound remuneration policies under AIFMD and the UCITS V Directive (the latest changes to the Undertakings for Collective Investments in Transferable Securities Directive).

UCITS V includes rules that UCITS must comply with when establishing and applying a remuneration policy for certain staff categories and the proposed UCITS Remuneration Guidelines further clarify the Directive’s provisions. The proposed Guidelines aim to ensure a convergent application of the remuneration provisions and will provide guidance on issues such as proportionality, governance of remunerations, requirements on risk alignment and disclosure. The consultation paper also proposes a revision of the AIFMD Remuneration Guidelines by clarifying that, in a group context, non-AIFM sectoral prudential supervisors of group entities may deem certain staff of an AIFM in that group to be identified staff for the purpose of their sectoral remuneration rules.

ESMA will consider the feedback received to the consultation and is aiming to finalize and publish the UCITS Remuneration Guidelines and a final report by Q1 2016, ahead of the transposition deadline for the UCITS V Directive (March 18, 2016). It is expected that the final report will also include the revision of the AFIMD Remuneration Guidelines.

FSA Consultation on Proposed Amendments to the Listing Regime

On October 2, the FSA published consultation paper 12/25 ‘Enhancing the effectiveness of the Listing Regime and feedback on CP12/2’ (CP12/25).  In CP12/2 the FSA consulted on proposed amendments to the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules, to maintain the operational effectiveness of the Listing Regime.  In CP12/25 the FSA has published the feedback it received to CP12/2 as well as the final rules to:

  • o    prevent ‘back-door’ listings of entities that would otherwise not be eligible for listing through the use of reverse takeovers;  
  • o    ensure the Listing Rules fully reflect the scope and nature of a sponsor’s role;
  • o    codify existing practice on financial information requirements and transactions, much of which was contained in the UKLA technical notes; and
  • o    introduce new rules to allow ‘externally managed companies’ (companies where the management of the company is deliberately outsourced to an offshore company to place it outside the controls and protections of the Listing Regime) a transitional period of 15 months to put new arrangements in place, and to remove premium listing status from such structures.  

These new rules will come into effect on October 1, except for the new rules for sponsors and the new rules relating to reverse takeovers and financial information requiring the appointment of sponsors which will take effect on December 31.

The FSA is also using CP12/26 to consult on certain new proposals to:

  • o    optimise the entry criteria to the Premium segment so as to maintain the strength of the Premium Listing brand;
  • o    ensure that the eligibility requirements continue to apply as meaningful ongoing obligations;
  • o    clarify the operation of the free-float provisions; and
  • o    ensure that shareholders are provided with better quality information. 

In addition, the FSA is consulting on a revised proposal relating to the Alternative Investment Fund Managers Directive (AIFMD) in relation to the potential conflict caused by overlapping obligations imposed by the AIFMD on fund managers and by the Listing Regime on the board of an investment trust.  The FSA invites comments by January 2, 2013.