UK asset managers may have understood that they had until July 2014 to apply to become Alternative Investment Fund Managers (AIFMs) under the AIFM Directive (AIFMD). However, in a recent statement, the UK Financial Conduct Authority (FCA) issued new advice aimed at putting them on a tighter timetable. Specifically, the FCA stated that a firm relying on the UK’s transitional arrangements under the AIFMD that wishes to become a “full-scope UK AIFM” must have its new FCA permissions in place by 22 July 2014 at the latest. To be sure of achieving this, the FCA advises firms to file their applications by 22 January 2014. Accordingly, asset managers should aim to finalise their plans for operating under the new regime as soon as possible with a view to making their applications to the FCA in the first part of 2014.
The FCA recently updated its AIFMD website to advise firms currently relying on the transitional relief to apply for authorisation or variation of permission no later than 22 January 2014, on the basis that the FCA may need a full six months to determine the application. This reflects the requirement under the UK Alternative Investment Fund Managers Regulations 2013 for the FCA to determine an application for authorisation as a full-scope UK AIFM within three months of receiving a complete application, with the power to extend the period for a further three months where it considers necessary.
UK investment managers should note that, in addition to AIFMs coming fully within the AIFMD’s regulatory regime (i.e. “full-scope UK AIFMs” in the FCA’s rules), the FCA’s advice is also directed to firms acting as sub-threshold AIFMs (which are termed “small authorised UK AIFMs”) and as depositaries, each of which can benefit from the UK’s transitional arrangements and will therefore need to vary their permissions by 22 July 2014. Although the FCA also advises small authorised UK AIFMs and depositaries to apply to vary their permissions by 22 January 2013 to meet the 22 July 2014 deadline, it should be noted that applications made by these firms will technically not be subject to the shortened three month period applicable to full-scope UK AIFMs, but to the standard statutory time limits applicable to the FCA (or PRA in the case of a depositary that is a UK bank or other credit institution) for determining general variation of permission applications. This standard statutory limit only requires the FCA (or PRA) to determine a complete application within six months or an incomplete application within 12 months (see section 55V Financial Services and Markets Act 2000).
To complicate matters further, there is a separate group of sub-threshold AIFMs that currently benefit from the transitional arrangements but will need to become “small registered UK AIFMs” by 22 July 2014. These mostly comprise “internally managed” investment companies and investment managers of certain real estate funds which are generally not FCA (or PRA) authorised firms currently. They will therefore not need to apply to vary any permissions (because they have none), but will instead need to register with the FCA as small registered UK AIFMs. Although the FCA’s advice does not address such AIFMs expressly, it does state that firms that “need to be registered” should submit a complete application no later than 22 April 2014 – i.e. three months before the end of the transitional arrangements. However, it is important to note that the FCA’s time limit for determining such registration applications extends to six months where it considers the application to be incomplete in any respect.
Please note that if a UK AIFM that is currently relying on the transitional arrangements ceases to manage AIFs before 22 July 2014, it will not be required to become authorised or registered as an AIFM.
Any firm that believes it will not be able to meet the deadlines should contact the FCA as soon as possible.
Overseas AIFMs based elsewhere in the EEA that are currently relying on the transitional arrangements for their activities in the UK should note that the UK’s transitional regime ceases on the earlier of the date on which they are authorised by their national regulatory authority and 22 July 2014. Likewise, non-EEA entities which are relying on the transitional arrangements for their fund marketing activities in the UK should note that the UK’s transitional regime ceases for them on the earlier of the date the relevant entity gives formal notification to the FCA that it is marketing in the UK (within the requirements of the AIFMD) and 22 July 2014.