The financial crisis in 2008 exposed a series of weaknesses in the financial system. Regulators across the globe undertook a review of supervisory frameworks for global financial markets and decided to introduce a set of stricter rules, including inter alia, Dodd-Frank, FATCA, UCITS V and of course, Alternative Investment Fund Managers Directive (AIFMD).
Back in April 2009, the European Commission proposed a Directive on the Alternative Investment Fund Managers (AIFMs), including hedge funds, private equity and venture capital funds, property funds, investment trusts, real estate’s investment trusts, FSA authorised non-UCITS funds, funds of alternative investment funds, qualified investor schemes, charity funds, commodity funds, and infrastructure funds with the objective of creating a thorough and effective regulatory and supervisory framework for AIFMs at the European level.
The Alternative Investment Fund Managers Directive was published in the official journal on 1st July 2011 and has come into force 21st July 2011. This now means the EU Member States, such as the UK, are required to transpose the AIFMD by 22nd July 2013. The Directive is one of several pieces of EU and domestic regulation that hedge fund managers will need to consider over the coming months.
The purpose of the Alternative Investment Fund Managers Directive is to:
Ensure all Alternative Investment Fund Managers (AIFMs) are subject to appropriate authorisation and registration requirements
Provide a framework to monitor macro-prudential risks through regular reporting obligations
Ensure proper monitoring and limitation of micro-prudential risks
Provide a common approach to protecting professional investors in Alternative Investment Funds (AIFs)
Enhance public accountability of fund managers holding controlling stakes in companies
Develop a European single market for AIFs
On 28th June 2012, the European Securities and Markets Authority (ESMA) published a consultation paper on the proposed guidelines, which set out how AIFMs will be required to implement remuneration policies to comply with the EU Alternative Investment Fund Managers Directive.
The European Commission is now in the process of implementing measures based on ESMA’s advice. Once the AIFMD is in effect, all AIFMs operating on European soil will have to be authorised by the relevant home member state and demonstrate that they are suitably qualified to provide AIF management services.
The detailed implications of the AIFMD are subject to the Financial Service Authority (FSA) and other EU regulatory bodies, producing their own rules consistent with the final ESMA guidelines, which will apply to the AIFMs regulated by those bodies. The FSA is expected to publish its own consultation document later this year.
Important dates to remember:
FSA publication of consultation paper with draft regulations – expected end of August 2012
FSA Policy Statement published – Q1, 2013
Regulations to be implemented and in force in UK law – 22nd July 2013
TalkingPoint: Update on the AIFM Directive Financier Worlwide moderates an online discussion focusing on the AIFM Directive between Stuart McLaren, a partner at Deloitte LLP, Peter Stapleton, a partner at Maples and Calder, and Neil Robson, an associate at Schulte Roth & Zabel International LLP.
Also don’t forget to check out ESMA’s Discussion paper on Key concepts of the Alternative Investment Fund Managers Directive and types of AIFM, and the Consultation paper on Guidelines on sound remuneration policies under the AIFMD.
Look out for more AIFMD updates in the coming months.