On 13 December 2013, the Central Bank issued the sixth edition of the AIFMD Q&A which contains three new questions along with updates to existing questions (for clarification purposes). The Q&A aims to promote common supervisory approaches and practices in the application of the AIFMD and its implementing measures.
Delegating portfolio or risk management
An Irish AIFM cannot delegate portfolio or risk management to a third-country undertaking located in a jurisdiction where there is no ESMA-compliant cooperation agreement in place between the Central Bank and the relevant competent authority.
Using shareholder funds to meet the ‘own funds’ and ‘initial capital’ requirements
Article 9 (Initial Capital and Own Funds) of AIFMD does not prohibit an internally managed AIF from meeting the ‘own funds’ and ‘initial capital’ requirements through the use of shareholder funds.
Availability of the inward marketing regime when marketing other than under an AIFMD passporting arrangement
Marketing AIFs in Ireland is subject to the Irish AIFM Regulations 2013 and conditions in relation to marketing without a passport are provided for in Regulations 37 and 43.
An Irish entity must be authorised under the Investment Intermediaries Act in order to provide custodial operations involving the safe-keeping and administration of investment instruments. Furthermore, if it proposes to engage in significant new activities or create new branches, it must first consult with the Central bank.
AIFM reporting obligations
While ESMA has published guidelines in relation to AIFM reporting obligations, the Central Bank has not yet decided the date from which AIFMs subject to the AIFM Regulations must submit first reports. It expects to do so early in 2014.
As of 11 December 2013, the Central Bank has signed all ESMA-approved co-operation agreements between EU securities regulators and 45 non-EU authorities, with the exception of Maldives and Turkey.
Regulatory technical standards for determining types of AIFMs
On 17 December 2013, the European Commission adopted a Delegated Regulation on regulatory technical standards which determine whether an AIFM is an AIFM of an open-ended or a closed-ended AIF.
An AIF is considered open-ended if the shares are repurchased at the request of its shareholders (prior to the commencement of its liquidation phase or wind-down), out of the assets of the AIF and in accordance with the procedures and frequency set out in its prospectus or offering documents.
An AIF is closed-ended if it is not open-ended.
The Delegated Regulation is integral to the harmonised interpretation of AIFMD. The nature of the AIF will dictate the decisions of the AIFM in relation to the appropriateness of the frequency of valuations, the alignment of the AIFs’ investment strategy, liquidity profile and redemption policy.
The Delegated Regulation will enter into force on the twentieth day following that of its publication in the Official Journal of the European Union and will be directly applicable in all Member States.
Contributed by Vincent Coyne