This AIFMD update highlights developments under the Dutch regime for non-Dutch AIFMs regarding:
- Marketing to Dutch retail investors under a European passport;
- Marketing to Dutch investors with a minimum participation of EUR 100,000;
- The private placement regime - the potential extension of the AIFMD passport regime to 12 non-EU countries.
AIFMD - general
The AIFMD introduced a harmonised regulatory regime for AIFMs that offer participations in an AIF to professional investors in the EU. This includes a European passport regime which allows EU AIFMs to offer participations in EU AIFs across the EU on the basis of a single AIFMD-license.
The regulatory regime with respect to some AIFMs and AIFs is not fully harmonised:
- Non-EU AIFMs cannot (yet) make use of the passport regime. The same applies to EU AIFMs insofar as they offer participations in non-EU AIFs. Both types of AIFMs would therefore in principle require a license in each EU Member State. However, the AIFMD allows Member States to apply a national private placement regime;
- Member States can impose stricter rules to AIFMs that offer participations to retail investors.
Since the implementation of the AIFMD in the Netherlands, the Dutch regime on these topics has been amended or is likely to be amended. This update provides an overview of the most relevant developments.
Retail investors: European passport and top-up regime
As of 1 January 2015, a European passport obtained by an EU AIFM not only serves as a basis to market participations in an EU AIF to Dutch professional investors, but also to Dutch retail investors. It is not required to obtain a license or regulatory approval in the Netherlands. Instead, once the European passport under the AIFMD is obtained, a notification to the Dutch regulator of the intention to market to Dutch retail investors is required.
Such EU AIFMs will then subsequently have to comply with several 'top-up' requirements. These requirements are to a large extent based on requirements applicable to undertakings for the collective investment in transferable securities (UCITS). Subject to certain exceptions for closed-ended AIFs, an AIFM that wishes to offer participations in an AIF to retail investors in the Netherlands will have to:
- implement certain business conduct policies;
- adequately treat complaints from Dutch retail investors, which includes a mandatory membership to the Dutch Financial Services Complaints Institute;
- comply with additional transparency requirements towards retail investors and the AFM, including via the AIFM's website;
- adhere to certain procedures regarding amendments to the terms and conditions;
- include additional as well as more detailed information in the prospectus/offering memorandum of the AIF on, amongst others, costs, risks and the AIFM's remuneration policy;
- obtain approval of an auditor on the prospectus/offering memorandum;
- take into account additional requirements regarding the preparation of (semi-)annual reports and director's reports of the AIFM and the AIF; and
- make available a key investor information document in Dutch.
These top-up requirements require careful consideration and effort, but are surmountable.
EUR 100,000 exception: no retail top-up regime
As of April 2016, the DFSA provides that an AIFM will not be subject to the above retail top-up requirements, if retail investors are only permitted to invest in the AIF for an initial value of at least EUR 100,000 per investor. The rationale is that a retail investor that purchases participations for at least EUR 100,000 is presumed to have sufficient expertise and to be sufficiently professional and would thus not need the additional protection of the retail top-up requirements.
For the avoidance of doubt, the above exception exclusively excepts an AIFM from the top-up requirements. It does not relieve an AIFM from the required authorisation / passport requirement or other (on-going) requirements under the AIFMD-regime.
Dutch private placement regime: changes may be ahead
To date, a non-EU AIFM cannot make use of an AIFMD European passport. A non-EU AIFM that wishes to market an AIF in the Netherlands can rely on the Dutch private placement regime. This means that the AIFM does not have to obtain a license if:
- participations are solely offered to qualified investors,
- the AFM and the supervisory authority of the country in which the AIFM is established - which may not be listed as FATF non-cooperative - have concluded a cooperation agreement for the exchange of supervisory information; and
- the AIFM has submitted a notification form with the AFM as well as a formal attestation notice of the AIFM's home state regulator confirming that the regulator is able to effectively comply with the cooperation agreement (this attestation notice is not required from US, Guernsey and Japanese AIFMs that are registered in their home state - in such case it is assumed that the home state regulator can comply with the cooperation agreement).
Please note that certain ongoing transparency requirements (prospectus requirement, regulatory reporting) still apply to non-EU AIFMs that are active under this private placement regime. Also asset stripping rules may apply.
ESMA advice on the AIFMD European passport extension
The current Dutch private placement regime is, in principle, of a temporary nature. When the AIFMD was introduced, it was the intention that the harmonised AIFMD European passport regime be extended to non-EU AIFMs. This would allow such AIFMs to offer AIFs across the EU on the basis of a AIFMD-license obtained in one Member State. This harmonised regime is intended to ultimately replace the national regimes.
In this context, on 19 July 2016 ESMA published an extensive advice on the extension of the passport regime to 12 non-EU countries. ESMA concluded that there are no significant obstacles to extending the passport regime to Canada, Guernsey, Japan, Jersey and Switzerland. With respect to Australia, Hong Kong, Singapore and the United States, ESMA's advice is qualified, and with respect to Bermuda, Cayman Islands and Isle of Man ESMA indicated that it cannot give a definitive or full advice. It is now up to the European Commission to decide whether it adopts a delegated act specifying when the extended passport regime becomes applicable in all Member States. It is intended that if the European Commission decides that the passport regime will become available in respect of these jurisdictions, a period of (at least) three years will commence during which both the national regimes as well as the passport regime will be available to AIFMs that are active from these countries.
Termination of private placement regimes
After this three year period, ESMA shall advise on the termination of the national regimes. If ESMA concludes that the passport regime can become the sole possible regime, the European Commission shall in principle, within three months from receiving such advice, decide to terminate the possibility to have national private placement regimes and make the passport regime the sole and mandatory regime in the Member States of the EU.
We would expect the Dutch legislator to – until termination by the European Commission - uphold the private placement regimes following the entry into force of the extended passport regime.