Transposition of the AIFMD
HMT consultation paper
On Friday 11 January HM Treasury (HMT) published a consultation paper entitled ‘Transposition of the Alternative Investment Fund Managers Directive’. It is the first in a series of consultations and policy papers that we can expect from HMT and the Financial Services Authority (FSA) in the run-up to the AIFMD transposition deadline of 22 July 2013. This first paper focuses on sub-threshold fund managers, marketing and private equity.
We have set out below a summary of the policy position taken within HMT’s consultation paper.
Regimes for sub-threshold AIFMs
|Type of sub-threshold AIFM||HMT proposal|
|AIFMs of Non-UCITS Retail Scheme & Qualified Investor Scheme||
Full application of all AIFMD provisions except for:
|Internally managed AIFs that are investment companies||HMT have not defined what day-to-day activities investment companies would need to undertake to classify as an internally managed AIF, further details are likely to be set out within the FSA’s next consultation paper, to be published in February 2103. HMT suggested that these types of AIFMs would only be subject to the registration regime set out in the Directive (i.e. none of the detailed operational, capital, transparency or depositary provisions). It should be noted the Government proposes to give powers to the Financial Conduct Authority (FCA) to refuse registration if an AIFM is subject to a prohibition order, could be subject to a company director’s disqualification order, or has been convicted of an offence involving fraud or dishonesty or an indictable offence.|
|External AIFMs of investment companies||HMT notes that the FSA intends to set out more details on the exact requirement for these AIFMs within their next consultation paper, however HMT says that it intends to broadly replicate the status quo so that external AIFMs of investment companies are subject to a similar level of regulation for external managers currently carrying out individual portfolio management for those companies.|
|AIFMs of Unregulated Collective Investment Schemes (UCIS) (i.e. many hedge, private equity and real estate funds)||HMT’s suggested approach is to replicate those current rules (i.e. not future AIFMD rules) applicable to unregulated UCIS operators, in general this means there is little impact for these firms as a result of the AIFMD, unless they want to 'opt in'.|
|Type of fund / investor||HMT proposal|
|UK AIF to retail investors||The AIFMD gave the Government the option of permitting certain AIFs to be marketed to retail investors, however this consultation paper does not propose to change the range of persons to whom QIS and UCIS may currently be offered, or the range of AIFs that may be marketed to the general public.|
|Non-UK AIF to retail investors||Retail funds from designated territories (Jersey, Guernsey and Isle of Man) and other jurisdictions that are marketed in the UK will need to be AIFMD compliant and the Government will be setting out its approach within the next consultation paper.|
|AIF to non-retail investors||The Government proposes to continue the national private placement regime until at least 22 July 2018, with no additional requirements over and above those within the AIFMD, i.e. transparency and private equity 'asset stripping' provisions|
Articles 27 to 29 of the Directive impose obligations on AIFMs to provide certain information to the competent authority where an AIF acquires control of a non-listed company or issuer. HMT have confirmed that the FCA will be the competent authority that receives this information from UK AIFMs.
HMT also confirmed that it intends to change the UK regulations to give effect to the policy suggestions of the FSA in relation to different types of firms acting as depositaries for private equity funds.
Definition of 'marketing'
It is important that UK firms are aware that the definition of 'marketing AIFs' is not fully consistent with the current financial promotion regime; there is a risk that current business activities will move from being outside, to within scope. HMT noted that “if an investment adviser passes on subscription material to a professional investor, asking if the investor wishes to subscribe to an AIF, that might constitute placement of an AIF (and therefore marketing under AIFMD), but it may not constitute financial promotion, if there is no element of persuasion”.