On 19 December 2012, the European Commission adopted the long awaited draft Level II delegated regulation ("Level II"), which supplements the Alternative Investment Fund Managers Directive ("AIFMD").  The AIFMD is due to be implemented by Member States at a national level by 22 July 2013. 

The AIFMD will govern many aspects of how most investment fund managers established in the EU ("AIFMs") run and structure their businesses and the services they provide. The AIFMD will also impact the ability of AIFMs established outside of the EU to market those of their funds that are non-UCITS funds ("AIFs") to investors in the EU.

Level II will be required reading for any manager that might seek authorisation as an AIFM in order to enable it to plan effectively for implementation. Level II contains detailed requirements relating to:

  • conditions and procedures for the determination and authorisation of AIFMs, including the capital requirements applicable to AIFMs;
  • operating conditions for AIFMs, including rules on conflicts of interest, risk management, liquidity management, organisational requirements and rules on valuation;
  • conditions for delegation;
  • depositaries, including the depositary tasks and liabilities;
  • reporting requirements;
  • leverage calculation; and
  • cooperation arrangements.

Notwithstanding the adoption of Level II, the draft regulation is subject to a three-month scrutiny period by the European Parliament and the Council. It will only enter into force, provided that neither co-legislator objects, at the end of this period. We do not expect there to be any objections.

ESMA has also published the following:

  • Consultation on Draft regulatory technical standards on types of AIFMs: This sets out formal proposals for the content of the regulatory technical standards that ESMA is required to publish in relation to the determination of AIFMs. To some degree the AIFMD has different application depending on the type of AIFM (which in turn hinges in part on types of AIF managed). The regulatory technical standards mainly focus however on seeking to assist in the determination of open ended and closed ended funds.
  • Consultation on Guidelines on key concepts of the AIFMD:  This Consultation attempts to deal with ancillary points not dealt with in the Consultation on the regulatory technical standards. The Consultation addresses, among other topics, vehicles that are not AIFMs or AIFs or which are exempted from the AIFMD. 

The closing date for responses to the consultations is 1 February 2013.  ESMA intends to publish the final guidelines and technical standards in the first half of 2013.