AIFMD Updates - June 2013 Publication

 

What is AIFMD?

The Alternative Investment Fund Managers Directive (“AIFMD”) is an EU legislation aimed at providing a framework for regulating alternative investment fund (“AIF”) managers. This mandate is intended to protect investors from systematic risk by providing a unified regulatory landscape amongst EU members. The Directive defines an alternative fund as any collective investment scheme that is not a UCITS (UCITS is a well-established European regulatory framework for marketing regulated funds across Europe).

 

What types of structures are considered AIF’s?

If the following situations apply, an alternative investment fund would be considered an AIF for AIFMD purposes:

  • Marketing alternative investment funds in or into the EU, regardless of fund domicile.
  • Managing alternative investment funds in or from the EU, regardless of fund domicile.

The following fund structures would be exempt from AIFMD:

  • If an alternative investment fund had existing investors in the UK but there were no current marketing efforts taking place.

AIFMD will be effective as of July 22, 2013. A transitional period has been proposed to extend reporting requirement until July 22, 2014.

 

Reporting Requirements

AIFMD will require several reporting requirements including:

  • AIFMD compliant Audited Financial Statements (GAAP is allowable)
  • Fund activities and performance information
  • Form Annex IV
  • Legal documents with certain disclosures required by the AIFD

The Directive requires that GAAP financial statements break out certain accounts. AIF managers will need to prepare annual financial statements that will conform to both GAAP and AIFMD. The goal for all AIF’s should be to have one set of financial statements that can be used for both GAAP and AIFMD purposes.

 

The Form Annex IV is a similar requirement to the Form PF currently in place for US managers. However, the process for filling out the Annex 4 will be different than that of the Form PF and the Form Annex IV process will be extremely challenging to process manually. AIF’s will likely need a technology solution in order to aggregate the data and facilitate the data upload to the AIFMD system.

 

What you should do now.

  • Gap analysis between the fund’s current offering materials and the requirements of article 23 of AIFMD.
  • Decide whether to amend your OM or exclusively use the AIFMD disclosure document.
  • Produce additional updated OM/AIFMD disclosure document.
  • Start considering technology solutions including third party vendors.
  • Consult with your auditors to prepare for additional financial statement requirements.
  • Assess your current and future marketing strategy in conjunction with the AIFMD requirement.

 

Looking ahead

In July 2015, an AIFMD passport may be available to US managers that would allow funds managed by EU managers to market across Europe without using the private placement regime. To obtain the AIFMD passport, managers will be required to be compliant with the substantial requirements of AIFMD.

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