Alternative Investment Fund Managers Directive

ESMA Produces Guideline on AIFMD Reporting Obligations

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On October 1, the European Securities and Markets Authority (ESMA) published guidelines on reporting obligations under Articles 3 and 24 of the Alternative Investment Fund Managers Directive (AIFMD) in Annex II of its final report.  The aim of the guidelines is to provide clarification on:

  • the information that alternative investment fund managers (AIFMs) should report to national competent authorities (NCAs);
  • the timing of the reports; and
  • the procedures to be followed when AIFMs move from one reporting obligation to another.

Following translation of the guidelines into the official languages of the EU, a two-month notification period will be triggered during which NCAs must notify ESMA whether they comply, or intend to comply, with the guidelines.  Final Report.

FCA Publishes FAQs on Passporting Under AIFMD

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On August 27, the FCA published a new webpage setting out frequently asked questions (FAQs) on passporting arrangements under the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD).

The FAQs are designed to help firms and their advisers with the passporting process.  The questions discuss: (i) identification of the competent authority; (ii) authorization as a manager of an AIF; and (iii) continuation of use of UCITS passports in relation to UCITS business.  Webpage.

ESMA Publishes Opinion on Draft Regulatory Technical Standards Under the AIFMD

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On August 20, the European Securities and Markets Authority (ESMA) published the opinion it submitted to the European Commission about draft regulatory technical standards (RTS) required under Article 4(4) of the Alternative Investment Fund Managers Directive (AIFMD).

The opinion comes after the Commission’s concerns about ESMA’s approach to the differentiation between open and closed-ended alternative investment funds (AIFs) in the draft RTS.  To alleviate the concerns, ESMA has submitted an amended version of the draft RTS for the Commission’s consideration, which are contained in Annex I to the opinion.

Under the amended RTS, the key element for the identification of an open-ended AIF is the existence of repurchases or redemptions of the AIF’s shares or units prior to the commencement of its liquidation phase or wind-down, provided that the repurchases or redemptions happen at the investors’ request.  Opinion.

FCA Updates AIFMD Webpage with Information on Passporting Arrangements

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On August 15, the Financial Conduct Authority (FCA) updated the “latest news” webpage on the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) with information on passporting arrangements under the AIFMD.

The update notes that ESMA recently published an opinion that recognizes the right of firms to be able to exercise passport rights in Member States that have not yet transposed the directive, assuming the firms’ own home Member State has transposed the AIFMD. 

As the UK has transposed the AIFMD, UK firms should be able to exercise passporting rights in all EEA states, with the exception of Norway, Liechtenstein and Iceland.  UK firms will be able to exercise AIFMD passporting rights in these jurisdictions when the EEA Agreement (to which Norway, Liechtenstein and Iceland are signatories) has been updated to include the AIFMD within its scope.  Similarly, UK firms will be able to exercise passport rights in Norway, Liechtenstein and Iceland pursuant to the European Social Entrepreneurship Funds Regulation (Regulation 346/2013) (EuSEF Regulation) and the European Venture Capital Funds Regulation (Regulation 345/2013) (EuVECA Regulation), when the EEA Agreement has been updated to include these regulations within its scope.  “Latest News” Webpage.  Opinion.

ESMA Publishes Opinion on Late Transposition of AIFMD

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On August 1, the European Securities and Markets Association (ESMA), published an Opinion (ESMA/2013/1072) containing practical arrangements to address the issue of late transposition of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD).  AIFMD was supposed to be transposed into member states’ national law by July 22, but with some states failing to meet the deadline, ESMA’s Opinion aims to minimise the impact on industry and investors.  Opinion.

AIFMD Comes Into Force in the UK

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On July 22, the UK law implementing the Alternative Investment Fund Managers Directive (AIFMD) came into force.  The scope of the AIFMD is broad (with a few exceptions), creating a tighter regulatory framework for alternative investment fund managers (AIFMs), including managers of investment trusts, hedge funds and private equity firms.

On July 23, the Financial Conduct Authority (FCA) published a new webpage to record permissions and passports granted under the AIFMD.  The FCA is updating the Financial Services Register to make the necessary changes, and in the meantime, the FCA will publish the details of firms who have been granted the new AIFMD permissions and any associated management passports.  Webpage.

ESMA Finalises Cooperation Agreements for Alternative Investment Funds

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On July 18, the European Securities and Markets Association (ESMA) published a press release stating that it has approved seven Memoranda of Understanding (MoUs) between EU securities regulators and non-EU authorities granting responsibility for the supervision of alternative investment funds (AIFs).  The MoUs are applicable from July 22 and will enable cross-border marketing of AIFs to professional investors between jurisdictions.

ESMA’s Board of Supervisors approved MoUs with authorities from the Bahamas, Japan, Malaysia, Mexico and the United States, including the Commodity Futures Trading Commission.  ESMA has now negotiated 38 MoUs on behalf of the 31 EU/EEA authorities.

The Alternative Investment Fund Managers Directive (AIFMD) requires that MoUs are entered into between the EU and non-EU authorities. MoUs allow alternative investment fund managers (AIFMs) from non-EU countries access to EU markets or to perform fund management by delegation from EU AIFMs.  The MoUs cover non-EU AIFMs that market AIFs in the EU and EU AIFMs that manage or market AIFs outside the EU.  The MoUs also cover cooperation in the cross-border supervision of depositaries and AIFMs’ delegates.  Press Release.  Memoranda of Understanding.

AIFMD: Countdown to Compliance

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The July 22 deadline for EU Member States to transpose the Alternative Investment Fund Managers Directive (AIFMD) into national law has arrived.  While the competent authorities in the UK and Germany have made significant progress in implementing new regulations to transpose the AIFMD into national law, other EU member states, including France and Italy, are currently consulting regarding the relevant implementation rules.  It is unclear whether those Member States will be ready in time.

In the UK, the Financial Conduct Authority (FCA) provided clarity by setting out its response to its November 2012 and March 2013 consultation papers and confirmed the FCA’s final rules for implementation of the AIFMD in its June 28 policy statement (PS13/5) (Policy Statement).  The rules in the Policy Statement supplement the UK’s Alternative Investment Fund Managers Regulations 2013, which were approved by the Delegated Legislation Committee in the UK on July 3.

For further details on the key provisions of the AIFMD and the specific measures implemented by Member States in an effort to transpose the AIFMD into national laws, please click here.

AIFMD: ESMA Final Guidelines on Sound Remuneration Policies

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On February 11, the European Securities and Markets Authority (ESMA) published its final report in relation to sound remuneration policies under the Alternative Investment Fund Managers Directive (AIFMD).  The guidelines are intended to ensure that the provisions on remuneration in Articles 13 and 22(2)(e) and (f) of Annex II to the AIFMD are applied in a consistent and uniform manner.

The full text of the final guidelines is contained in Annex III to the report and include key information on:

  •  the categories of staff that they apply to;
  • the types of remuneration covered by the guidelines; and
  • internal governance arrangements of Alternative Investment Funds in respect of remuneration.

The guidelines will apply from July 22, 2013, subject to the transitional provisions prescribed by the AIFMD.

FSA Consultation on the Implementation of the Alternative Investment Fund Managers Directive

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On November 14, the FSA published its first consultation paper regarding the transposition of the Alternative Investment Fund Managers Directive (AIFMD) into UK law.

The consultation paper sets out proposals on the following areas:

  • the prudential regime applicable to all types of alternative investment fund managers (AIFMs);
  • FSA Handbook amendments to reflect the main Level 1 requirements of the AIFMD, such as operating requirements for AIFMs, duties of AIFMs when managing funds, and transparency obligations towards both the Financial Conduct Authority and investors themselves; and
  • the regime applying to firms which act as depositaries of alternative investment funds, such as eligibility requirements, capital requirements and an independence requirement.

The deadline for consultation responses is February 1, 2013. It is anticipated that a second consultation paper will be published in February 2013.