On 14 February 2014 the FCA announced that it is considering its interpretation of the definition of “funds under management” for the purposes of Article 9(3) of the AIFMD. The definition is used to calculate the amount of additional own funds a manager must hold once the value of the portfolio of AIFs exceeds EUR 250m.
Following representations from a number of firms, the FCA has been made aware that the current requirement in Chapter 11 of the Interim Prudential sourcebook for investment business (“IPRU(INV) 11”) can in certain circumstances lead to disproportionate outcomes.
In particular, the FCA is proposing a change that will, when calculating the value of portfolios, allow for derivatives to be valued at their market value instead of requiring them to be converted to their underlying positions. The FCA will consult on this change in a quarterly consultation later in 2014.
To discourage a delay in the submission of applications for authorisation as an AIFM, the FCA will allow individual AIFMs to take advantage of the proposed change by making available a modification by consent. To take advantage of the modification by consent, an email or letter must be sent to the Central Waivers Team at the FCA. On receipt of this, the FCA will write to confirm that the modification has been granted and will publish each modification on its website.
Firms that obtain a modification by consent should state this in their AIFM applications. Unless withdrawn, it will be valid until 31 January 2015 or on the change of the Glossary definition of “funds under management” that is used in IPRU(INV) 11.
UCITS management companies which are subject to IPRU(INV) 11 may also apply for the modification by consent.
The FCA says that it continues to encourage firms to submit applications at the earliest possible time and hope that the ability to apply for the modification by consent will facilitate this.