The Alternative Investment Fund Managers Directive (AIFMD or Manager Directive) of the European Union, which went into effect on July 22, 2013, sets forth rules for managers of private alternative investment funds that will apply to any U.S. and other non-EU private fund manager that either:
- markets one or more funds (EU or non-EU domiciled) to investors in the EU
- manages one or more EU domiciled funds
Note: It is not always clear whether a sub-adviser is treated as a manager for these purposes.
Phased Implementation for Non-EU Managers
- July 22, 2013 to 2015: U.S. managers are not eligible for the pan-EU marketing passport (which would allow a manager to market its fund(s) freely to professional cross-border investors within the EU). U.S. managers may only market in the EU in accordance with national private placement rules subject to compliance with certain additional operational requirements described below.
- 2015 to 2018: U.S. managers may either continue to use national private placement rules or they may opt in to the Manager Directive to obtain the marketing passport.
- 2018 onwards: All managers would be required to become registered in the EU to market to EU investors.
Operational Conditions and Disclosure Requirements for U.S. Managers Conducting Private Placements
For a U.S. manager to be able to market funds in EU countries, the U.S. manager must comply with the following conditions:
- Disclosure and Reporting: The U.S. manager must comply with certain disclosure and transparency provisions in the Manager Directive with respect to both investors and local regulators. Not all funds’ current private placement memoranda will necessarily comply without some revisions. Frequency of required government filings will depend on assets under management.
- Cooperation: Information exchange agreements must be in place between the regulator(s) of the EU country or countries where the funds are marketed, as well as the regulator(s) of the country where the fund itself is established and the regulator of the country where the non-EU Manager is established — i.e., for a U.S. manager, the Securities and Exchange Commission (SEC). The United States and the Cayman Islands have such agreements in place with the central EU regulator.
Note: EU member states will implement the Manager Directive under their own regulations, and there may be variances between one EU member state’s approach and that taken in another EU member state. The advice and assistance of local counsel will be necessary.
Transitional Period. Some jurisdictions (e.g., the U.K.) may adopt a one-year transitional period for the implementation of the Manager Directive. Any such transitional period may apply only to those non-EU managers that are marketing a specific fund in the EU before July 22, 2013.
Reverse Solicitation or "Passive Marketing." The Manager Directive specifies that the Manager Directive’s requirements that would otherwise apply to the manager for funds being marketed in the EU do not apply to an offering of funds where the marketing activity takes place in the EU at the initiative of the EU investor.
If you manage an EU fund or a U.S. or other non-EU fund whose marketing will take place in the EU, you should assess what changes you will need to make your fund's offering and marketing materials, and to your operations and marketing activities.