ESMA has submitted revised draft regulatory technical standards (RTS) on determining the types of alternative investment fund managers (AIFMs) for the European Commission’s consideration.

This is in response to a letter from the Commission to ESMA raising concerns over Article 1(2)(a) of the initial draft RTS which suggested basing the distinction between managers of open and closed-ended AIFs on whether a fund offers redemptions and whether redemption is available at least once a year. Applying Article 16(1) and Article 19(3) of AIFMD, the Commission concluded that the exclusion of AIFs that offer redemption less than once a year from the definition of an open-ended AIF is not permitted and invited ESMA to submit revised draft RTS.

ESMA believes that the revised RTS fully address the Commission’s concerns, while retaining some more flexibility to take account of existing market practice. It stated that the key element for the identification of an open-ended AIF on the basis of the revised RTS is the existence of repurchases or redemptions of the AIF’s shares or units prior to the commencement of its liquidation phase or wind-down, provided that the repurchases or redemptions happen at the investors’ request. At the same time, the revised draft clarifies that certain decreases in the capital of the AIF do not qualify as repurchases or redemptions for the purpose of the definition.

Central Bank of Ireland publishes consultation on types of AIFs under AIFMD and unit trust schemes under the Unit Trusts Act 1990 (CP68)

On 19 July 2013, the Central Bank published a consultation on types of AIFs under AIFMD and unit trust schemes under the Unit Trusts Act 1990 (including Exempt Unit Trusts (EUTs) and Real Estate Investment Trusts (REITs)).

The consultation confirms the Central Bank’s view that EUTs are likely to be considered as AIFs. Similarly, having revisited the status of EUTs in the light of AIFMD implementation, the Central Bank argues that it now seems clear that EUTs cannot be considered to be excluded from the class of unit trust schemes within the scope of the Unit Trusts Act.

The implications of a positive finding on these points are significant. An EUT which is an AIF under AIFMD must have an AIFM who must ensure compliance with AIFMD requirements, whether or not the Unit Trusts Act applies. If the value of all AIF under management by the AIFM exceeds the AIFMD thresholds, the AIFM must be authorised.

An EUT which must be authorised under the Unit Trusts Act must be established as a retail investor AIF (RIAIF) or a qualifying investor AIF (QIAIF). If it is not possible for an EUT to meet the QIAIF investor criteria and minimum subscription requirement, the EUT must be established as a RIAIF. An EUT authorised as a RIAIF would not be permitted to have a registered AIFM and the AIFM must qualify as an authorised AIFM.

The Central Bank is also inviting comments in relation to other undertakings such as REITs and Special Purpose Vehicles, categories of undertakings which have been mentioned as possible AIFs. The deadline for responses to CP68 is 11 October 2013.