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AIFMD: European Commission releases Q&A document - 03/04/2013


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Commission's Q&A Document - key considerations

On 27 March 2013, the European Commission published on its website a series of questions and answers on the application of the Alternative Investment Fund Managers Directive (AIFMD Directive 2011/61/EU).The Q&A section provides responses to several technical questions raised in relation to AIFMD, including the key topic of the transitional arrangements for pre-existing AIFMs. Further questions can also be submitted directly to the Commission online.

We have compiled all of the Q&A into a single document which you can download here.

We would like to draw your attention to the following items included in the document:

Transitional arrangements

The response provided by the Commission on the transitional period between 22 July 2013 and 22 July 2014 does not provide the answer that the industry was hoping for. The Commission takes the view that during the one year transitional period, AIFMs are expected to comply with the requirements on a "best efforts basis", which includes compliance with the reporting requirements from 22 July 2013 (see section below). At the same time, the Commission acknowledges that only after the transitional period are all of the obligations "legally binding".

No specific definition of "best efforts" is provided in the Commission's answer, however this term would make it difficult to justify inaction during the transitional period. "Best efforts" is a term used by the Commission as opposed to the Directive, which requires AIFMs to "take all necessary measures to comply" but also allows AIFMs to submit their application by 22 July 2014. The Commission considers that Member State implementation of the rules (by 22 July 2013) should enable regulators to monitor compliance with "not-yet authorised AIFMs", although the means to achieve this is left to national regulators. The Commission goes on to list by example a range of requirements that it considers should be complied with on a "best efforts" basis. These requirements cover effectively the full Directive with the exception of authorisation and EU marketing.

Separately and in advance of the Commission Q&A, both the UK Treasury and the FSA (in its recent consultation paper CP 13/9) have clarified that they intend to permit UK firms managing and/or marketing AIFs in the UK to make full use of the 12-month transitional period with full compliance required by 21 July 2014. Other national regulators may choose to issue further clarifications on their approach to the transitional arrangements in light of the Commission's Q&A.

Furthermore, the possibility of late transposition by some Member States could result in an uneven application of the rules across the EU from 22 July 2013, although, as a principle of EU law, the rights provided for under the AIFMD can be exercised as of the transposition deadline irrespective of whether a Member State has transposed the Directive.

MiFID-related activities

Much attention has focused on the extent to which AIFMs can perform MiFID-related activities under an AIFM license, since both licenses are mutually exclusive. By way of derogation, Member States may authorise AIFMs to perform a limited number of MiFID-related activities under Article 6(4). The Commission considers that as this is an exemption to the general rule, it has to be interpreted narrowly. The Commission Q&A also considers that the EU passport does not apply to these MiFID-related activities performed by derogation. As the possibility for an AIFM to hold a separate restricted MiFID license is excluded, the AIFM would consequently not be able to freely provide these services across the EU under its AIFM license.

Private Equity

The Commission considers that the exemption for "holding companies" under Article 2(3)(a) does not cover private equity and venture capital. The Commission points out that the holding company exemption must be read in conjunction with Recital 8 which specifically mentions that managers of private equity whose shares are admitted to trading should not be excluded. "Operating on its own account" should be interpreted also in the context of the requirement that the shares of such holding company are admitted to trading on a EU regulated market. Hence this means that the holding company is a separate legal entity that carries out the business of owning and holding equity shares of other companies without the intent to dispose of such shares. Such business is done on the own account of the holding company and not on behalf of a third party. It is inherent in the concept of a holding company that all other operations apart from those related to the ownership of shares and assets are done via its subsidiaries, associated companies or participations. The Commission concludes that the exclusion of a holding company in Art 2(3)(a) was meant to exclude from the AIFMD large corporates such as Siemens or Shell. The criterion of being listed is not in itself sufficient, according to the Commission.

Reporting

Specific transitional arrangements are not foreseen for reporting obligations. Existing AIFMs will be expected to start reporting as of the date of application of the AIFMD. Sub-threshold AIFMs will also have to report as from the same date. The Directive requires submission of regulatory reporting on an annual, semi-annual or quarterly basis depending on Assets under Management (AuM). The Commission acknowledges that while the frequency is harmonised, start dates for reporting to national regulators may differ. It has encouraged the European Securities and Markets Authority (ESMA) to issue guidance concerning the alignment of dates for delivery of the reporting information.

Additional Q&A relate to:

  •  Scope and exemptions
  •  Passport issues
  •  Responsibilities of and coordination between member state regulators
  •  Master and feeder AIFs
  •  Member State of reference for non-EU entities
  •  Issues related to private equity
  •  Marketing to retail investors
  •  Depositaries
  •  Delegation
  •  Valuation
  •  Remuneration
  •  Application of "own funds" rules

Final thoughts

The Commission Q&A has provided additional clarity on several technical aspects of the AIFMD but some uncertainty and interpretational issues remain in some key areas, not least in terms of the transitional period to 22 July 2014. National regulators have been left with some discretion in terms of how to approach compliance during the transitional period and how to apply the definition of an AIF with respect to the fund structures within their jurisdiction. Supported by further guidance from ESMA in certain areas, we expect national regulators will be required to address some of these key uncertainties.

This may, however, lead to a non-harmonised application of the requirements in the first year of the AIFMD and perhaps beyond in relation to other matters of interpretation. Through our EMEA AIFMD network we closely monitor these national differences and would be more than happy to advise on such market intelligence.

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.

This newsletter is also available in German.

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