The Quarterly Consultation (see earlier story, AIFMD: Remuneration) also contained proposals and other matters which will be of interest to AIFMs.
IPRU(INV) 11 contains the prudential rules for both Collective Portfolio Management Firms and for Collective Portfolio Management Investment firms (albeit that the latter also have to refer back to IFPRU or GENPRU/BIPRU as applicable). Common to both types of firms is the need to calculate a component of regulatory capital based upon funds under management of the AIFs.
Currently the definition of ‘funds under management’ as it relates to IPRU(INV) 11 requires derivative instruments to be converted into their equivalent positions in the underlying assets. The FCA has now rethought this stance (the AIFMD is silent on the exact method by which the portfolios of AIFs should be calculated).
The definition will be amended so that derivative instruments will be valued at their market value. Until such time as the definition is changed firms can apply to the FCA for a modification by consent. The process is fairly painless and simply involves completing a ‘Direction’ form and emailing it to the Central Waivers team. Details of the process, and access to the form, can be accessed by way of the link provided.
Article 36 Custodians (sometimes referred to as ‘depositary-light’) are those entities that carry out limited depositary-like activities e.g. safe-keeping (and specifically as set out in AIFMD Article 21(7), (8) & (9)) when a non-EU AIF managed by an EU AIFM is marketed in the Union.
Unless such an entity also undertakes MiFID activities it will be categorised as an ‘investment management firm’ and will fall under the prudential requirements as set out in IPRU(INV)5. IPRU(INV) 5.2.3(3)(a)(ia) imposes a minimum own funds requirement of €125,000 on such firms.
However if such an entity was a MiFID firm because of additional activities (i.e. an ‘investment firm’) then those additional activities could mean a minimum prudential requirement of only €50,000. The FCA proposes to amend FUND 3.11.33 so that €125,000 is applicable all such firms.
The Quarterly Consultation also contains a suite of notification forms for use by AIFMs when notifying the FCA of e.g. delegation (the form includes a useful flow-chart clarifying when prior approval or prior notification is required) or of a new fund etc. – see Appendix 2 of CP14/4 for details.
