AIFMD: Passporting of Activities

This will be of particular relevance to firms that currently have a MiFID passport and that are, or potentially are, Alternative Investment Fund Managers (AIFMs).

In addition to ‘managing an AIF’, under the AIFMD a UK AIFM will also be permitted to undertake limited MiFID type activities (in brief, portfolio management; investment advice; safe-keeping; and reception and transmission of orders – the latter three can only be granted in conjunction with portfolio management).

It is the opinion of the European Commission that these additional MiFID type activities cannot be passported under the AIFMD. Furthermore it has stated that in its view an AIFM cannot be separately authorised under MiFID. Putting these two views together means that whilst an AIFM will be able to passport its AIF management (‘collective portfolio management services’) to other EEA States, it will not be allowed to passport these additional MiFID type activities.

However it is the view of the FCA that an AIFM authorised to provide the additional services should be able to passport them to other EEA States.

The differing views mean whilst the FCA will action such passport requests (and indeed has prepared draft applications for AIFMs) and will notify the relevant EEA States, there remains the possibility that those States may refuse to accept the notifications having regard to the European Commission’s opinion.

The FCA website advises:

“Accordingly, firms will need to take account of this risk when considering the most appropriate business model under AIFMD. We cannot say how these developments will impact individual firms, but firms should also consider all the possible solutions available to them to minimise the potential for there to be disruption to their business.

We will seek to engage with other EEA supervisory authorities and the Commission to try to reach a common understanding that reflects our views”.