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Commission issues AIFMD implementing regulations - 31/05/2013


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New rules on member state of reference and AIFM opt in procedure

The European Commission published on 15 May 2013 two implementing regulations which set out:

  1. The procedure for determining the member state of reference for non-EU AIFMs (Regulation 448/2013)
  2. The procedure for sub threshold AIFMs and UCITS management companies to opt in to the AIFMD regime (Regulation 447/2013).

1. Member state of reference

A “member state of reference” will be required by non-EU AIFMs under the non-EU management and marketing passport, due to take effect in 2015. The Commission Regulation provides a more formalised process adding information, procedural and timeframe requirements. The process could be potentially complex where several regulators are involved and where distribution is envisaged in several countries, as no single deciding factor on the member state of reference is provided. Instead regulators must come to a mutual agreement and in the absence of such agreement, ESMA will arbitrate the decision.

The procedure

The procedure is straight forward where there is only one country involved but becomes more complicated where AIFs from different domiciles and multiple countries of management and distribution are combined. The request for determining a member state of reference must be addressed to all possible member states of reference.

As an example of how the system would work, a non EU-AIFM managing AIFs in three different countries (e.g. Ireland, Luxembourg and UK) and distributing in several (e.g. Germany, the Netherland and Sweden) would have to apply to six different regulators, which are required to communicate immediately with each other and with ESMA in making the determination. They can decide to involve other regulators in the process if this is deemed necessary.

Time limit

The Regulation helpfully sets a time limit to this potentially complicated process. Regulators must decide jointly within one month on the appropriate member state of reference. If the non-EU AIFM is not informed in writing within 7 days of the outcome, it may choose its own member state of reference and inform the regulators concerned of its choice. However, the regulators then have a further two days to respond to this decision and may make a subsequent determination on the member state of reference which would prevail over the selected choice should they be different.

Information required

The Regulation lists case by case the information to be disclosed in the non-EU AIFM’s submission. Depending on the scenario, this information can include:

  • A list of member states where the AIFs are managed• A list of member states where assets are managed
  • The amounts of assets managed in each member state
  • List of target member states for marketing purposes
  • A description of the marketing strategy and plans, including details on distribution activities and anticipated investors in target markets

Comment

Given the range of factors involved, determination of an EU member state of reference could be a very uncertain and complex process for non-EU managers who operate in several domiciles or markets. Non-EU managers that chose to set up an EU AIFM will be able to avoid this process and maintain more control in determining where and how their operations are structured.

What is an member state of reference?

An EU “member state of reference” is a prerequisite for a non-EU AIFM seeking to market AIFs under the non-EU passport, which is due to come into effect in 2015. A member state of reference will also be required from 2015 for non-EU AIFMs who are managing EU based AIFs. That member state will supervise the management and/or marketing activities of the AIFM and act as the home regulator under the marketing passport for non-EU managers. The non-EU AIFM must appoint a legal representative in in its member state of reference to act as a contact point and perform the compliance function relating to management and marketing activities.
Determination of the member state of reference does not confer authorisation status on a non-EU AIFM. Once the member state of reference has been determined, the AIFM in question must apply for authorisation to its member state of reference in the normal way as laid out under Articles 7 and 8 of the Directive.
With regard to the designation of a Member State of reference, for a non-EU AIFM managing an EU AIF, in accordance with articles 37 and 67 of the Directive the obligation to designate a Member State of reference as per the procedure outlined in Regulation 2013 - 448 is effectively deferred until 2015.

2. Opt in procedure

Commission Regulation No 447/2013 is a short implementing Regulation which sets out the procedures for AIFM choosing to opt in under the AIFM Directive.

AIFMs who will choose to opt in will be required to follow the same procedure as that established for AIFMs that are obliged to seek authorisation under the Directive. The same documentation and conditions apply.

The opt-in is available to AIFM’s who have previously registered as under the relevant thresholds and UCITS Management companies.

One point of note, in the case where an AIFM falls below the threshold for inclusion, through redemptions or asset erosion, a prior authorisation is only revoked at the request of the AIFM. It is only if that revocation of AIFM status has been previously made and accorded that an AIFM ceases to be an AIFM with full obligations, responsibilities and duties.

The opt-in provisions will apply if subsequent to that revocation the AIFM elects to be governed by the full terms and provisions of the Directive. 

With regard to national policies it should be noted that in its discussion paper and preparatory work, the AMF in France is actively encouraging all potential AIFM’s to opt in irrespective of threshold exclusions.

We trust this information is of assistance and remain at your disposal for any further questions. Please contact your usual Deloitte representative or your local AIFMD project leads for further information.

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