On 11 November 2010, the EU Parliament adopted the Alternative Investment Fund Managers Directive (AIFMD). Some of the headline points are set out below.
- Almost all EU based Alternative Investment Fund Managers (AIFM)s will require authorisation involving capital requirements, organisational requirements and ongoing requirements from early 2013*
- EU Alternative Investment Funds (AIF)s may need to be authorised as self managed (where they do not have an AIFM) or to appoint an AIFM from early 2013*
- Authorised AIFMs will be permitted to manage EU AIF in other EU member states so Irish regulated AIFM will enjoy an EU management passport from early 2013*
- Authorised AIFM will be permitted to market EU AIF to professional investors in other EU member states so Irish regulated AIFM will enjoy an EU marketing passport in respect of EU AIF from early 2013*
- EU member states may permit EU AIFM to market non EU AIF managed by them to professional investors in that member state under the private placement regimes of the relevant member state (if any, and subject to certain conditions)
- Non-EU AIFM will be able to market non-EU AIF to EU investors under the private placement regimes of the relevant member state (if any, and subject to certain conditions)
- National private placement regimes are to be replaced by a parallel passport regime, (subject to review and analysis by ESMA). However the national private placement regimes will continue until "turned off" by the EU Commission, which will only happen if and when a parallel passport regime has been introduced.
- There is no prohibition on reverse solicitation.
- AIFM will be permitted to delegate portfolio management or risk management to entities which are authorised or registered for the purpose of asset management and are subject to supervision. If the entity is non-EU, a co-operation agreement between the EU member state regulator and the regulator of the non-EU entity will need to be in place.
- Private equity funds will be subject to provisions which limit distributions within the first two years after a company is taken over by a private equity fund (known as asset stripping). Private equity funds will also have to comply with detailed information and disclosure requirements.
- Depositary liability has changed as has the delegation structure and the prime broker structure and further clarity will be provided on this area in the implementing measures.
- Valuation liability has altered and the valuation function will need to be functionally independent.
- Remuneration policies will have to be implemented which do not encourage risk taking which would be inconsistent with the AIF objectives. ESMA will produce guidelines which take account of the principle of proportionality
- Leverage limits must be set for each AIF. Fund leverage may be capped by the regulator. Leverage employed will be reported to regulators regularly
- Significant additional transparency and reporting requirements, as well as risk management and liquidity management requirements and conditions governing delegation will add to compliance costs.
The AIFMD is due to be implemented by EU member states by 2013. The new European Securities and Markets Authority (ESMA) and the EU Commission will now work on preparing AIFMD guidelines and implementing legislation. While the outline of the new regime has become clearer, the devil will be in the detail of these implementing provisions and a great deal of lobbying by industry is still needed. Please speak to your usual contact in the A&L Goodbody investment funds team for a more detailed examination of the AIFMD. * These dates are not yet certain.