AIFMD: the road to implementation
The Alternative Investment Fund Managers Directive (AIFMD) has transformed the regulatory environment for alternative investment funds in the EU, despite having been in force only since July 2013.
AIFMD attempts to harmonize national regulations governing alternative investment fund operations, but EU states have implemented its provisions at different rates.
Our review of the AIFMD landscape provides fund managers needed clarity around the regulatory and operating environments they face in coming months.
Transposition and transitional relief
By the end of August, 15 EU member states had fully transposed AIFMD into their own legislative codes. Twelve others are in various stages of drafting and approval. Estonia has only partially implemented AIFMD.
Responding to this incomplete transposition, the European Securities and Markets Authority (ESMA) ruled that alternative investment funds authorized to operate in one member state can use that marketing and management “passport” in states that have not transposed the Directive.
Status of AIFMD transposition (as of August 2013)×
AIFMD also lets member states provide one year of transitional relief (starting 22 July 2013) so asset managers can adjust to the changes and earn authorization to operate. Terms of the relief are limited and vary by member state.
AIFMD and private placement
Our survey shows that 17 countries intend to allow some form of AIFMD private placement, but the requirements vary among EU member states. All countries allowing private placement will apply these minimum AIFMD standards or better:
- Transparency and disclosure – for alternative investment funds with managers outside the European Economic Area (EEA)
- Depositary-lite services – for non-EEA alternative investment funds managed by EEA alternative investment fund managers
- Cooperation arrangements
- Cooperative nation – the country where the alternative investment fund/alternative investment fund manager is established should not be listed as a Non-Cooperative Country by the Financial Action Task Force
Country-specific restrictions also apply. See the full report for details.
Status of private placement (as of August 2013)×
Our report identifies four additional key issues:
Most EU member states are aligning remuneration requirements with alternative investment fund manager authorization. Financial groups whose employees manage a range of “regulated” portfolios will have to consider and potentially comply with two or more remuneration standards.
Seven countries will allow alternative investment fund managers to appoint a depositary in a different EU location than the alternative investment fund itself. After 2017, the depositary and the alternative investment fund must be in the same location.
Most countries look to ESMA for guidance and clarification regarding reporting dates, reporting languages and formats. Nonetheless, reporting requirements defined by local regulators vary widely. Fund managers will need to track local regulations closely.
Nine member states will require fund managers marketing non-EEA alternative investment funds in their jurisdiction to engage a qualified auditor. This may result in extra audit costs for non-EEA alternative investment funds.