The EU Alternative Investment Fund Managers Directive (2011/61/EU) (the “Directive” or “AIFMD”) applies to managers of alternative investment funds (each an “Alternative Investment Fund Manager” or “AIFM”). The main provisions of the Directive apply to AIFMs located in the European Union and which manage funds established in EU or non-EU jurisdictions. Important requirements under the Directive (elaborated in the European Commission’s December 19, 2012, Delegated Regulation (the “Level 2 Regulation”)) apply to managers based outside the European Union (non-EU AIFMs) in relation to funds established in non-EU jurisdictions which those managers wish to market in one or more EU jurisdictions.

This Advisory focuses on provisions which will apply to non-EU managers of non-EU funds to be marketed to EU investors with effect from July 22, 2013—the date that AIFMD provisions first become operational.1

In order to continue marketing2 to EU investors after July 22, 2013:  

  • Non-EU AIFMs will be required to comply with reporting and disclosure obligations under the AIFMD for each fund which is marketed into one or more EU jurisdictions. In summary, these obligations consist of pre-investment and ongoing disclosures to investors (see Tables A and B), an annual report (see Table C) and regular reports to an EU national regulator (see Table D) (Directive, Article 42(1)(a)).
  • Cooperation agreements under the AIFMD must exist between the national regulator of each EU member state in which marketing takes place and the supervisory authorities of the fund’s domicile and the country where the AIFM is established (Directive, Article 42(1)(b)). (Therefore, no US investment managers of Cayman funds will be able to market those funds into the European Union until both the US and Cayman regulators have entered into appropriate cooperation agreements with EU national regulators.)
  • The fund’s domicile and the country where the AIFM is established must not be on the list of non-cooperative countries and territories maintained by the Financial Action Task Force (Directive, Article 42(1)(c)).

If the above conditions are met, funds can be marketed to “professional investors” under the national private placement regimes of individual EU jurisdictions. As individual EU jurisdictions can impose additional requirements and conditions under their national private placement regimes, country-by-country analysis will remain necessary. “Professional investors” for this purpose include regulated banks, investment firms and insurance companies; large corporate and non-corporate entities and trusts; and investors electing to be treated as professional investors under the criteria set out in the EU Markets in Financial Instruments Directive (2004/39/EC)).

Reporting and Disclosure Obligations

Pre-Investment Disclosures to Investors

Pre-investment disclosures, as summarised below, must be provided to investors along with details of any material changes.  

Click here to view table.

Ongoing Disclosures to Investors

Ongoing periodic disclosures must be made to investors.

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Annual Reports

An annual report for each fund marketed in the European Union must be made available for each financial year no later than six months after the end of that financial year. The annual report must be provided to investors on request and must be also provided to the relevant EU national regulator (Directive, Article 22(1)). The accounting information in the annual report must be prepared in accordance with applicable accounting standards and audited (Directive, Article 22(3)).

Click here to view table.

Obligations to Report to Regulators

In addition to the pre-investment and ongoing disclosure obligations in relation to investors, AIFMs must regularly report to the relevant EU regulator (the “competent authority”) concerning the principal markets and instruments in which it trades on behalf of the funds it manages. The report must include information on the main instruments in which the AIFM is trading and the markets where it actively trades, as well as the principal exposures and most important concentrations for funds (Directive, Article 24(1) and Level 2 Regulation, Article 110).

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The AIFM must also supply to the competent authority the annual report of each fund it manages and a quarterly, detailed list of all the funds which the AIFM manages.

Under Article 24(5) of the Directive, a competent authority may require additional information on an ad hoc or periodic basis if considered “necessary for the effective monitoring of systemic risk.” The European Securities and Markets Authority (ESMA) must be informed of such additional reporting requirements. Conversely, ESMA may request competent authorities impose additional reporting requirements “in exceptional circumstances and where required in order to ensure the stability and integrity of the financial system or to promote long-term sustainable growth."