ISSUES OUTSTANDING OF THE ALTERNATIVE INVESTMENT FUNDS MANAGERS DIRECTIVE (AIFMD)
On 14 February 2015, the Royal Decree 83/2015 was published in the Boletín Oficial del Estado (BOE), amending Law 35/2003 of 4 November on collective investments (the CIS Act). The publication means, at least theoretically, that the implementation of Directive 2011/61/EU of the European Parliament and the Council of 8 June 2011, in respect of the Alternative Investment Funds Directive (AIFMD), in Spain is complete.
Just over three months have passed since the publication of the Royal Decree, however AIFMD raises a number of questions which require further clarity from the legislator and/or regulator in the near future. Topics which have been left wide open focus mainly on alternative investment funds and, specifically, closed-end collective investment funds, which were introduced in the recent Law 22/2014, of 12 November 2014 (amending the CIS Act) which seeks to regulate capital-risk entities and other closed-end collective investment entity types. Three issues seem particularly relevant, and these are set out below.
Firstly, the definition of an “Alternative Investment Fund” (AIF) in Article 4.1 a) of AIFMD remains very broad, despite the efforts of the European Securities and Markets Authority (ESMA) to narrow the definition in its August 2013 guidelines. The broad definition of an AIF is causing problems for stakeholders in analysing whether or not certain investment vehicles fall within the scope of AIFMD, which in turn has consequences both in respect of management and their commercialisation.
On February 18, 2015, the European Commission published the Green Paper on the Capital Markets Union, which aims to build a single capital market in the EU by 2019. At the same time, the European Commission published a consultation document on reforms to introduce a harmonised European framework for securitisation. It is striking that in that document the Commission itself raises the possibility of adjustments to AIFMD. Although AIFMD excludes from its scope special purpose vehicles for securitisation (and so does our legislator by excluding securitisation funds from the scope of Act 22/2014), certain investment structures that are not securitisation vehicles fall within the definition of AIF, despite having more in common with securitisations than with alternative investments. It would be good to take advantage of this new European legislative initiative regarding capital markets to improve on the definition of what is and what is not an AIF.
Secondly, particular attention is being paid domestically to the exclusion from the scope of Law 22/2014 of Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario (SOCIMIs). This exclusion, which is very reasonable from the perspective of promoting investment through this tax efficient vehicle, does not avoid the barriers which arise when marketing shares in SOCIMIs in other jurisdictions within the European Union. Vehicles which are analogous to SOCIMIs in other jurisdictions (such as REITs) have not been excluded from the scope of AIFMD when the directive has been implemented into the law of other member states. Therefore, it is necessary to analyse in those jurisdictions where they intend to market shares in SOCIMIs if marketing is permitted, either because the vehicle is not considered as an AIF in that jurisdiction, or because the law of that state recognises, for the purposes of marketing, the exception made by the Spanish legislature. In any case, in the prospectus of any SOCIMI it is strongly recommended to include “selling restrictions” and appropriate risk factors in relation to AIFMD.
Finally, it is important to highlight another aspect of AIFMD which requires further definition; the introduction of the role of depositaries of venture capital entities and closed-collective investment entities. According to its business plan for this year, the CNMV will release in the second quarter of 2015, a Circular to determine the specifics and exceptions applicable to the depositaries of such entities, developing, amongst other things, the technical aspects of depository and surveillance functions, control over cash flows duties in connection with the calculation of net asset value and valuation of shares and the liability regime. However, until the CNMV Circular is actually released, the management companies of closedended collective investment funds (new name given by the Act 22/2014 to companies managing venture capital) that have to appoint a depositary must review their operations and procedures and integrate the two, and coordinate with the depositories designated for the latter in order to comply with the functions assigned to them by the legislator.
In conclusion, AIFMD is a regime that still requires practical adjustments and certainly requires a sufficient period of effective implementation. Once the implementation of AIFMD has been analysed over the coming years, we will be able to judge whether it has met its objectives or if, on the contrary, it is necessary to introduce changes at European and national level to remedy possible gaps or inefficiencies.