Alternative Investment Fund Managers Directive

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The Alternative Investment Fund Managers Directive 2011/61/EU ("AIFMD") is a European Union Directive that entered into force on 22 July 2013. The Directive regulates:

  • EU fund managers that manage alternative investment funds (essentially hedge funds and private equity funds) ("AIFs") (wherever they are based);
  • fund managers (wherever they are based) that manage AIFs established in the EU; and
  • fund managers (wherever they are based) that market the units or shares of an AIF in the EU.[1]

Hedge funds and private equity funds and their Investment Managers (AIFMs) have not been subject to the same rules to protect the investing public as mutual (including UCITS) and pension funds and their managers. In general, the lack of financial regulation is seen by some[citation needed] to have contributed to the severity of the global financial crisis. The Directive was aimed at redressing this perceived regulatory gap.

The Directive was approved by the European Parliament and Council of the European Union on 8 June 2011 and published in the EU Official Journal on 1 July 2011 (OJ L171). The Directive is following the Lamfalussy process and has so far been supplemented by three Level II Regulations:

The European Securities and Markets Authority has also issued a number of guidelines to national competent authorities including on key concepts of AIFMD[3] and remuneration.[4]

The Directive needed to be written into national statute books by 22 July 2013 and, subject to the transitional periods, be brought into effect from this date.[5] As of 1 October 2013, 16 EU Member States had not yet transposed the Directive including Belgium, Finland, Greece, Italy, Poland, Portugal and Spain.[6]

Overview[edit]

The key changes being introduced by AIFMD are:

  • AIFMs established within the EU will need authorisation by 22 July 2013 (or 22 July 2014 in European Union Member States that use the transitional period).
  • EU AIFMs will be subject to detailed rules on delegation,[7] transparency, conduct of business, remuneration, leverage and reporting.
  • EU AIFMs will be required to appoint an independent custodian for each AIF which they manage.
  • EU AIFMs will be required to have independent risk management and valuation functions.
  • EU AIFMs authorised under the AIFMD will be granted a passport to either manage AIFs in other EU Member States or market units or shares in AIFs to professional investors.
  • Non-EU AIFMs marketing AIFs within the EU will be required to comply with disclosure requirements to both investors and EU regulators.[8]
  • EU AIFMs and certain non-EU AIFMs that invest in private equity will be subject to certain asset stripping rules [9] and notification and disclosure rules [10]
  • From 2015 non-EU AIFMs may acquire a passport to market units or shares in AIFs within the EU but will require authorisation within the EU.[11]
  • From 2019 the European Commission could potentially end the national placement regime of units or shares in AIFs across the EU.

Transposition in Malta[edit]

On 27 June 2013 (the measures were released on 25 June 2013) Malta became the first EU Member State to complete the transposition of the requirements of the Directive into national law.[12] The Maltese legislator and the Malta Financial Services Authority transposed the requirements of the Directive by means of a series of regulations issued under the Investment Services Act (Cap. 370, Laws of Malta) and a number of new MFSA rulebooks.[13]

Controversies[edit]

According to a study conducted by Deloitte,[14] most of the UK-based asset managers think that the AIFM Directive could reduce the competiviteness of the EU's alternative investment funds industry because of the compliance the regulations impose on the industry. In addition, these managers from the hedge fund, private equity and real estate sectors believe that the directive will reduce the number of non-EU managers operating within the EU.[15]

See also[edit]

Notes[edit]

  1. ^ Four months left to AIFMD: it is time to get off the fence. Retrieved on 14 June 2013.
  2. ^ European Commission Publishes AIFMD Level 2 Implementing Regulation. Retrieved on 14 June 2013.
  3. ^ ESMA publishes final guidelines on Key Concepts of AIFMD Retrieved on 14 June 2013.
  4. ^ ESMA publishes final guidelines on AIFM remuneration Retrieved on 14 June 2013.
  5. ^ Shore, Ben (19 October 2010). "EU finance ministers agree new hedge fund curbs". BBC News Business. Retrieved 18 February 2012. 
  6. ^ AIFMD Transposition across EU Member States - KPMG Retrieved on 12 December 2013.
  7. ^ Outsourcing by fund managers under AIFMD – A new framework or more of the same? Retrieved on 14 June 2013.
  8. ^ Four months left to AIFMD: it is time to get off the fence. Retrieved on 14 June 2013.
  9. ^ See Private equity deal making post-AIFMD: asset stripping rules by Giuseppe Giusti http://www.dirittobancario.it/approfondimenti/private-equity-e-venture-capital/private-equity-deal-making-post-aifmd-asset-stripping-rules
  10. ^ See Private equity deal making post-AIFMD: Notification and disclosure rules by Giuseppe Giusti http://www.dirittobancario.it/approfondimenti/private-equity-e-venture-capital/private-equity-deal-making-post-aifmd-notification-and-disclosure-rules
  11. ^ Four months left to AIFMD: it is time to get off the fence. Retrieved on 14 June 2013.
  12. ^ Malta publishes final AIFMD implementing measures: Malta is open for AIFMD business. Retrieved on 27 June 2013.
  13. ^ MFSA Statement on the AIFMD. Retrieved on 27 June 2013.
  14. ^ Alternative Investment Fund Managers Directive (AIFMD). Retrieved on 14 August 2012.
  15. ^ Fund Managers Afraid of AIFM Directive. Retrieved on 14 August 2012.

External links[edit]