Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (AIFMD) is a European Union (EU) directive governing the regulation of alternative investment fund managers (AIFMs) operating in the EU. It was published in the Official Journal of the European Union on 1 July 2011 and came into force on 21 July 2011.^[1] EU directives usually take effect in the individual member states only after transposition into national law.

The Directive regulates:

• EU fund managers that manage alternative investment funds (essentially hedge funds and private equity funds) ("AIFs") (wherever they are based);
• fund managers (wherever they are based) that manage AIFs established in the EU; and
• fund managers (wherever they are based) that market the units or shares of an AIF in the EU.^[2]

Hedge funds and private equity funds and their Investment Managers (AIFMs) have not been subject to the same rules to protect the investing public as mutual (including UCITS) and pension funds and their managers. In general, the lack of financial regulation is seen by some to have contributed to the severity of the global financial crisis. The Directive was aimed at redressing this perceived regulatory gap.

The Directive was approved by the European Parliament and Council of the European Union on 8 June 2011 and published in the EU Official Journal on 1 July 2011 (OJ L171). The Directive is following the Lamfalussy process and has so far been supplemented by three Level II Regulations:

• Commission Delegated Regulation (EU) No 231/2013 on exemptions, general operating conditions, depositaries, leverage, transparency and supervision;^[3]
• Commission Implementing Regulation (EU) No 447/2013 on opt-in AIFMs;
• Commission Implementing Regulation (EU) No 448/2013 on the procedure for establishing the member state of reference for non-EU fund managers.

The European Securities and Markets Authority has also issued a number of guidelines to national competent authorities including on key concepts of AIFMD^[4] and remuneration.^[5]

The Directive needed to be written into national statute books by 22 July 2013 and, subject to the transitional periods, be brought into effect from this date.^[6] As of 1 October 2013, 16 EU Member States had not yet transposed the Directive including Belgium, Finland, Greece, Italy, Poland, Portugal and Spain.^[7]

Overview

The key changes being introduced by AIFMD are:

• AIFMs established within the EU will need authorisation by 22 July 2013 (or 22 July 2014 in European Union Member States that use the transitional period).
• EU AIFMs will be subject to detailed rules on delegation,^[8] transparency, conduct of business, remuneration, leverage and reporting.
• EU AIFMs will be required to appoint an independent custodian for each AIF which they manage.
• EU AIFMs will be required to have independent risk management and valuation functions.
• EU AIFMs authorised under the AIFMD will be granted a passport to either manage AIFs in other EU Member States or market units or shares in AIFs to professional investors.
• Non-EU AIFMs marketing AIFs within the EU will be required to comply with disclosure requirements to both investors and EU regulators.^[9]
• EU AIFMs and certain non-EU AIFMs that invest in private equity will be subject to certain asset stripping rules.
• From 2015 non-EU AIFMs may acquire a passport to market units or shares in AIFs within the EU but will require authorisation within the EU.^[10]
• From 2019 the European Commission could potentially end the national placement regime of units or shares in AIFs across the EU.

Transposition

Malta (27 June 2013)

On 27 June 2013 (the measures were released on 25 June 2013) Malta became the first EU Member State to complete the transposition of the requirements of the Directive into national law.^[11] The Maltese legislator and the Malta Financial Services Authority transposed the requirements of the Directive by means of a series of regulations issued under the Investment Services Act (Cap. 370, Laws of Malta) and a number of new MFSA rulebooks.^[12]

Luxembourg (12 July 2013)

In Luxembourg, the AIFM directive was transposed into national law on 12 July 2013.^[13] According to the 2013 law an entity – in order to become an AIFM – will have to submit an application to, and obtain authorization from, the Commission de Surveillance du Secteur Financier (CSSF). The application must include information on the directors of the AIFM, its shareholders, and the alternative investment funds (AIF), which it intends to manage and demonstrate how the entity will comply with the requirements of the AIFM Law.^[14]

France (27 July 2013)

The AIM directive was transposed into France's national law on 27 July 2013.^[15]

Controversies

According to a study conducted by Deloitte,^[16] most of the UK-based asset managers think that the AIFM Directive could reduce the competiviteness of the EU's alternative investment funds industry because of the compliance the regulations impose on the industry. In addition, these managers from the hedge fund, private equity and real estate sectors believe that the directive will reduce the number of non-EU managers operating within the EU.^[17]

See also

• Markets in Financial Instruments Directive 2004/39/EC
• Undertakings for Collective Investment in Transferable Securities Directives 2001/107/EC and 2001/108/EC

Notes

External links

• The text of the directive: "Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010". Retrieved 15 April 2015. 
• The main page on alternative investments at the European Union Web site: "Alternative investments". Retrieved 15 April 2015. 
• Zepeda, R. (2014) "To EU, or not to EU: that is the AIFMD question", Journal of International Banking Law and Regulation, (2014) Volume 29, Issue 2, pp.82-102