AIFMD Countdown – June 2013

There is now just one month to go until the 22 July 2013 AIFMD implementation date. Whilst there have been several positive developments since the last update, it looks increasingly likely several EU countries will not be ready to implement the directive by the July go-live date. For UK managers currently authorised by the Financial Conduct Authority (FCA), the picture is now clearer than it was a couple of months ago, notwithstanding uncertainty still remains in a number of areas including how the UK will implement the AIFMD remuneration guidelines.

The main developments over the past month are as follows:

Following Ireland’s lead in May, the FCA published draft application forms enabling existing UK authorised managers to apply to vary their permission (VoP) to become an Alternative Investment Fund Manager (AIFM). We understand the FCA will prioritise VoP applications from managers that completed their March 2013 AIFMD survey and will seek to process applications within one month of receipt. In addition, Luxembourg has now published its AIFM application forms.

ESMA announced it has approved co-operation agreements with 34 global regulators. Amongst the countries included are the Cayman Islands, British Virgin Islands, Bermuda, Jersey, Guernsey, and the USA in addition to Switzerland and Brazil noted in our previous updates. Negotiations continue with further countries. Whilst ESMA has negotiated these agreements centrally each EU member state needs to enter into a bi-lateral agreement with each non-EU regulator. Luxembourg recently announced that it will sign the co-operation agreements and the FCA has commented on its website it expects to do the same. The ESMA announcement was welcomed since concern had been growing that the co-operation agreements, which are a key component of the AIFMD and required in order for non-EU managers or non-EU funds to access EU markets, or perform fund management by delegation from EU managers, may not be in place by 22 July.

The FCA published a draft of the variation of permission form for depositaries of Alternative Investment Fund (AIFs). Transitional provisions exist in the UK for firms already authorised to undertake trustee/ depositary business (i.e. they have until July 2014 to obtain the necessary AIFMD authorisation), but they nevertheless need to ensure the services they provide comply with the requirements of the directive. Firms wishing to enter the depositary market that are not currently authorised may apply to the FCA using the draft VoP application forms.

The FCA has also confirmed it believes that an AIFM authorised to provide MiFID services should be able to exercise its single market rights by passporting those services, and not just AIFM management services, to other European States. The FCA recognises this is contrary to the position taken by the European Commission and is attempting to reach a common understanding with the Commission and other European regulators on the issue.

The UK’s amended Alternative Investment Fund Managers Directive Regulations 2013, which were published in May and reported in the last AIFMD Countdown, have now been laid before Parliament and will come into force on 22 July 2013.

ESMA published a long awaited consultation on guidelines on reporting obligations required of AIFMs in respect of the portfolio of the AIFs they manage or market in the EU. This is definitely worth a read in conjunction with the reporting template that was set out in the AIFMD level 2 text to assess whether the reporting requirements will present particular challenges – something that several commentators believe could be the case.

ESMA also published a final report containing guidelines applying to AIFMs and national regulators on key concepts of the AIFMD which had previously been subject to consultation.

Over the coming month, we expect the FCA to publish their final AIFMD Policy Statement and many are hopeful the FCA will also issue the AIFMD remuneration consultation although this is likely to be later in Q3. It will also be interesting to see how prime brokers and depositaries conclude negotiations of the ‘Day One’ AIFMD depositary model for EU AIFs which, to our knowledge currently remains unresolved.