Although originally scheduled for ‘February’, the FSA released the eagerly awaited second AIFMD consultation paper (CP13/9 or ‘CP2’) on 19 March. The paper should be read in conjunction with CP1 (CP12/32) and HM Treasury’s two consultation documents (note that the first such document also contains the draft UK ‘Alternative Investment Fund Managers Regulations 2013’). In keeping with CP1 the paper refers to ‘EEA’ rather than ‘EU’ AIFs and AIFMs.
Chapter 2 concerns progress on EU measures to implement the Directive since CP1 was published. Interesting points include: further comment on the extent of delegation permitted by AIFMs (‘letterbox entity’) albeit that the FCA is not planning to issue any guidance on this save for the previously stated ‘case-by-case’ basis; smaller AIFMs managing AIFs below the relevant €100m/€500m thresholds will not need to comply with AIFMD remuneration requirements; and ESMA’s progress with respect to supervisory cooperation arrangements with non-EEA jurisdictions.
Chapter 3 highlights changes to COBS and SYSC in order to ensure compatibility with the AIFMD (as the latter will have its own relevant requirements). Examples include the disapplication of both the inducement rules (COBS 2.3) and of most of the organisational requirements in SYSC 4 to SYSC 10.
Chapter 4 tweaks some of the prudential requirements that were set out in CP1. A rethink by the FSA means that the proposed new Chapter 7 of IPRU(INV) – relevant to collective portfolio management firms and internally managed AIFs – will instead be a new Chapter 11. The prudential regime for full scope UK AIFMs will be extended to small authorised UK AIFMs of authorised AIFs (e.g. a NURS).
Chapter 5 considers the scope of FOS (DISP) and FSCS (COMP) under the AIFMD. The eligible complainant rules (DISP 2.7.6) will be extended to include those relating to the AIFM of an authorised or unauthorised AIF (but not if the AIF is a closed-ended corporate AIF e.g. investment trust). For the avoidance of doubt a ‘professional client’ or ‘eligible counterparty’ will, as now, not be an eligible complainant. FSCS scope will extend to cover cross-border fund management activities where the fund is FCA authorised. As such, the FSCS will cover, for example, an EEA AIFM managing a UK-authorised fund but will not cover a UK AIFM managing a non-UK fund.
Chapter 6 concerns depositaries.
Chapter 7 explains the approach to marketing under the AIFMD and the exercise of passporting rights in respect of both marketing and managing (examples of the application forms can be found at the end of CP13/9). FUND 10.5 introduces the guidance in respect of those firms wishing to take advantage of the UK’s national private placement regime e.g. a UK AIFM marketing a non-EEA AIF in the UK (Article 36) or a non-EEA AIFM wishing to market an AIF in the UK (Article 42). PERG 8 provides further guidance on marketing, including passive marketing and marketing by persons that are not the AIFM (or acting on behalf of the AIFM) e.g. a distributor.
Chapter 8 sets out proposals for FCA fee charging. Authorised AIFMs will be accommodated under the existing A.7 and A.9 fee-blocks (‘fund managers’ and ‘operators’ respectively). As such the authorisation fee will be £5,000 and a variation of permission fee will be £2,500 (or £250 if no change of fee-block is involved). Periodic fees will be more complex in that an AIFM will pay fees in A.7 for their portfolio management activities and fees in A.9 for their risk management activities.
As will be known the AIFMD has to be implemented (‘transposed’) by 22 July 2013. With this in mind we are advised that a further consultation paper (CP3) will be issued by the FCA ‘after 1 April 2013’ and a full AIFMD policy statement in June.
Complyport clients that may be impacted by the AIFMD have, of course, been previously provided with a useful Information Suite to help in their AIFMD preparations. We will shortly be sending such clients further material for the Information Suite based upon our detailed analysis of CP2.
