As most of you will be aware, the AIFMD trigger date has passed and we are now into the 12 month transitional period for UK AIF managers (“AIFMs”) who were actively marketing in the UK prior to 22 July 2013, but what should those caught by the AIFMD be doing to prepare for July 2014?

Amongst other things, a decision needs to be taken as to when to apply for a variation of permission (“VOP”) to manage AIFs as the FCA wants applications to be submitted by January next year. If you won’t be ready by then or if the passport is not required immediately, it needs to be made clear in the VOP that the variation is to be effective on 22nd July 2014 as, without this, the AIFMD will apply in full from the date the VOP is granted. The upside is that once the permission has been granted, the passport will be available in other member states.

Smaller (sub threshold) AIFMs will also need to register as a small registered AIFM by July 2014. As such they will need to comply with information requirements but will not benefit from the passport unless they opt in to the full requirements of the AIFMD. If you are a sub threshold manager of a European Venture Capital Fund, it is worth considering whether it would be possible to take advantage of a passport under the European Venture Capital Funds Regulations. Some of the requirements in these Regulations mirror AIFMD requirements.

MiFID firms (including managers of third party funds and portfolio managers) wanting to manage an AIF also have decisions to make, as an AIFM cannot also be a MiFID firm. There are additional services under the AIFMD which can be passported under the AIFMD and consideration will need to be given as to whether and to what extent the passporting of additional services will be sufficient. Potential advantages of changing from being a MiFID firm may for example include a lower regulatory capital requirement and the need for an ICAP. It may be necessary to set up a new subsidiary to manage AIFMs which sits alongside the portfolio manager and, if so, there will be other considerations such as the potential to share employees and directors.

Once these decisions have been made, AIFMs will want to use the transitional period to carry out a road map for implementation and a gap analysis. Changes are likely to be required to service agreements, outsourcing agreements and custody/ prime brokerage agreements. Remuneration packages need to be reviewed including, where relevant, carry schemes and claw backs. Likewise, procedures need to be in place/software ready in order to comply with the transparency and reporting requirements. AIFMs should have started the implementation plan and gap analysis already